Insurers must be disciplined in pricing
Insurers must become more disciplined in their approach to pricing to counter an increasing number of severe weather events, which cost insurers more than $1.1 billion last year.
The head of KPMG Insurance Group, Brian Greig, made the statement in a KPMG report, saying that the dual occurrence of severe weather events and an unstable investment market cut down profits and affected underwriting and pricing strategies.
“The weather events have been substantial during the past year and have cost the insurers in excess of $1.154 billion,” Greig said.
“Severe weather events, such as the western Sydney hailstorms last December and Mackay floods in February, are now no longer unusual events and the pricing models of the insurers must reflect this.”
Insurers reported a 20 per cent drop in profit last year, and underwriting surpluses fell 31 per cent to $1.9 billion. Investment performance is 9 per cent lower than the same time last year, caused by market volatility and credit spreads.
“The current landscape for Australian insurers must be framed in terms of discipline, rather than the growth story of previous years,” Greig said.
Greig also warned that severe weather events were revealing high levels of underinsurance among Australians, or no insurance at all.
“Policyholders who are not adequately insured will find they are exposed not only to the elements, but to a significant shortfall between replacement cost and what they are insured for.”
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