Over the past year, Australian consumers have enjoyed fairly stagnant home and car insurance premiums, in spite of the damaging storms that have frequented the country.
But analysts have forecast domestic premium rates to pick up across the board in 2016, with insurance firms seeking to alleviate the deterioration of their profits.
A challenging year for insurance companies
A new report by JP Morgan and consulting firm Taylor Fry revealed that the Australian general insurance industry had a tough year in 2015 as a result of catastrophe events and stronger competition between firms.
Their research found that many in the industry are concerned about this increased competition, which has prevented many firms from raising their premiums despite the high cost of claims from recent weather events.
A staggering 86 per cent of insurance brokers said they were worried about an excessively competitive rates environment while 57 per cent harboured concerns regarding pricing and profitability.
Another concern in the industry was technology such as driverless cars, with 44 per cent of underwriters worried about it.
The struggle of insurance companies is becoming increasingly apparent, with Suncorp recently announcing a dividend cut to 30 cents and half-year profits of only $530 million, down from $631 million – a 16 per cent drop.
The Queensland-based company revealed that their natural hazards damage costs of $362 million exceeded their budget by $28 million.
Suncorp Group chief executive Michael Cameron said these climate-change-related catastrophes are costing the company $2 million a day.
El Nino – not as kind to insurers as expected
El Nino, which kicked in last year, has traditionally been a favoured period of insurers since it is generally considered to have drier, less stormy weather – thus fewer insurance claims.
The JP Morgan/Taylor Fry report pointed out that since 1967, average catastrophe costs (excluding earthquakes) during El Nino years was $725 million while during La Nina years it’s $3,043 million – over four times more than El Nino’s average!
Despite this, the weather trends of 2015 and early 2016 have not been kind to insurers.
Claims up, premiums unmoved
According to the report for 2015, personal claims inflation increased to five per cent, from three percent while the householders class experienced seven per cent claims inflation – much more than the four per cent predicted in 2014’s survey. Meanwhile, domestic premium rates stalled to zero per cent.
On average, car insurance premiums actually decreased by two per cent last year. Senior insurance analyst at JP Morgan Siddharth Parameswaran told the Sydney Morning Herald that this can be attributed to increased competition.
“These rate reductions in 2015 I think were in response to try and solidify market share, and prices have come back a fair way,” he said.
JP Morgan/Taylor Fry analysts expect this trend to reverse in 2016 with a slight rise in car and home insurance premiums.
Shop around and be a smart claimer
If your insurer does decide to increase its premium, don’t forget to take advantage of the competitive market we have in Australia by comparing insurance offers and policies. Use our comparison tables for home insurance and car insurance to find great value.
Also, if you do need to make a claim, follow these tips:
- Read the small print: First and foremost, your product disclosure statement should detail exactly what you are entitled to as a policy-holder and what procedures you should follow in order to get the claim you deserve. This document forms part of your legally binding contract with your insurer, so read it and know your rights!
- Act quickly: A fast claim is a good claim. The longer you wait before making a claim or reporting an incident, the more suspicious it looks. Take photos of the damage as soon as you can and file a police report if it is a matter of crime.
- Keep it updated: If you’ve added anything new and valuable to your property, whether it be some renovation work on the house or expensive extras for your car like a spoiler, update your insurance policy. Also if you believe something has appreciated in value, raise your sum insured.
- Take care: Many insurers reject claims due to a lack of maintenance and care on the policyholder’s behalf. Do as much as you can to prevent accidents and incidents from happening, such as clearing blockages and keeping your possessions secure.
- Honesty is the best policy: Insurers can decline a whole claim on the basis of dishonesty, so don’t exaggerate values or make up stories.