Australian insurance market improves in H1 2024 amidst increased competition, choices

Post-pandemic business changes continued to impact the life insurance market's profitability.

The Australian insurance market saw significant improvement in the first half of 2024, with increased competition and more choices for buyers, according to a report by Marsh.

The cyber insurance market experienced notable growth, with more lenient terms and lower prices. This was driven by advancements in cyber security practices and increased risk maturity among insured businesses. The market also welcomed new cyber insurers, expanding overall capacity.

Insurers in this market also expanded their offerings, with some now providing coverage limits of up to $15m for primary or excess coverage, a significant increase from the $10m limit in 2023.

The growing capacity and competition created a favourable environment for buyers, leading to lower rates. Insurers were also more willing to offer broader coverage.

The environmental impairment liability insurance market stabilised, with average rate increases ranging from 0% to 5%. This was a moderation compared to the previous year, when increases ranged from 5% to 10%. Rising reinsurance costs, increased claim frequency, and higher pollution remediation costs were the primary drivers of these rates.

Private health insurance saw moderate annual premium increases, averaging 3% in 2024. Whilst slightly higher than in previous years, this was below the 6% increase initially proposed by most health funds to the federal government in late 2023.

Hospital and medical services, as reflected in the Consumer Price Index, contributed to a 5.7% rise in health group costs during the second quarter of 2024 compared to the same period in 2023.

The group personal accident insurance market faced challenges in areas such as coverage limitations, pre-existing conditions, premium costs, and claims management.

To mitigate potential rate fluctuations, Marsh advised insureds to explore opportunities to secure competitive rates and terms for two to three years, if possible.

Profitability in the life insurance industry remained challenging due to post-pandemic business changes, high inflation rates, increased regulatory oversight, and stricter financial advisor licensing requirements. Additionally, the market contracted following the exit of a major life insurer in 2023, reducing competition and limiting pricing flexibility.

The workers compensation market continued to face challenges from inflationary pressures, long-tail claims, and increased claim frequency in the first half of the year. However, this was partially offset by a rise in wages declared against policies.

Insurers aimed for average portfolio increases of 2% to 5%, though actual outcomes varied based on each state's scheme position and individual insurer performance. Legislative changes in Western Australia also impacted market conditions.

Despite some challenges, Marsh emphasised that insureds could benefit from locking in competitive rates and terms for an extended period to mitigate future uncertainties.