The last 12 months have been a tough year for Australian insurers as highly-publicised natural disasters pushed up claims costs across the industry, but there is some optimism for 2012.
That's according to the annual JP Morgan Deloitte General Insurance Industry Survey, which surveyed some of the largest underwriters, insurance brokers and reinsurers in the country.
JP Morgan senior insurance analyst Siddharth Parameswaran said that 2011 was a particularly challenging year for insurers because the premium rate increases delivered were insufficient to deal with the higher claims trends related to such catastrophes as the localised yet destructive Queensland floods and Cyclone Yasi.
Significant losses were incurred across property classes for all underwriters in both commercial and personal lines. Profit deterioration was particularly bad for commercial classes, which sat at 106 per cent, up from 92 per cent in 2010, the study found.
Despite negative 2011 results, industry participants anticipated overall combined ratios – that is claims costs minus reinsurance plus all other expenses – would improve to 89 per cent in 2012.
"While commercial premiums only picked up in certain segments, they increased a lot more than the industry had expected and we're expecting acceleration in rates in the coming year," Parameswaran said.
According to the survey, premium rates for domestic classes are forecast to rise to an average of 7 per cent in 2012 compared to this year's 5 per cent rate, while rates for commercial classes are forecast to rise to 5 per cent in 2012 compared to 3 per cent this year.
Parameswaran believes the need to drive up rates this coming year will be particularly important in order to claw back flailing industry profitability. Deloitte insurance leader Stuart Alexander was quick to note, however, that profitability forecasts for the insurance industry have historically fallen short of actual results.
