Premiums up, investments down in Australia’s general insurance industry

KPMG outlined influential factors for the industry’s performance in 2021.

Australia’s insurance industry may have ended 2021 with a bang especially as insurance profits went up by 281% to $2.53b (A$3.4b) for direct insurers, but investments in 2021 fell by 64%, dragging insurance profit results well below profits in 2017 to 2019, a report by KPMG Australia revealed.

In their annual report for the industry, KPMG noted a significant increase in profits from 2020 which had been impacted by severe natural hazard events and initial recognition of the COVID-19 Business Interruption provisions. Increase in profits was largely driven by an increase in gross written premiums (GWP) with no corresponding increase in claims costs. 

However, the 64% drop to $380m in investment income dragged 2021’s performance, ending with 2021 insurance profit still well below profits received from 2017 to 2019 despite the increase in GWP and improvements in claim costs.

The general insurance industry’s average GWP quarterly increase for 2021 was logged at 2.6%. KPMG said this reflects the highest percentage movement it has seen in recent years. This growth was partially driven by rate increases in some product classes and demonstrates a hardening of the market.

KPMG forecasted continued growth in GWP for insurers with the ongoing rate increases expected this year. KPMG also expects natural catastrophes like the East Coast Flood events will be a significant cost to the insurance industry.

The industry is increasingly concerned that the frequency and severity of natural hazard events will significantly push premiums up and make some areas uninsurable.

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