Saturday 19 August 2023
Insurers paid out $36.5 billion in claims last year, helping millions of Australians recover from the unexpected. Insurers are committed to ensuring products and services provided to customers are of a high standard and are consistent with regulatory obligations and community expectations.
Because of a series of very significant extreme weather events since the Black Summer bushfires the sector and its customers have experienced several very challenging years. In 2022 alone, there were more than 300,000 disaster-related claims lodged from four declared insurance events across the country, costing more than $7 billion in insured losses.
At the same time, in response to the Financial Services Royal Commission insurers have upgraded systems and processes and improved the way they engage with customers. This has resulted in better capacity to address customer issues and work more closely with regulators in ensuring improved customer outcomes.
We acknowledge there is more work to be done, which is why in April we commissioned Deloitte to undertake an independent review of how insurers responded to last year’s floods. This review predated the recently announced Parliamentary inquiry and will feed into that process, which we look forward to participating in.
Given the critical nature of insurance, it is vitally important that Australia has a robust and profitable insurance sector to help families, businesses, and communities get back on their feet.
Insurer profits are cyclical and often impacted by factors outside of the control of the businesses, including extreme weather events. Insurers faced historically low profits in 2020, 2021, and 2022, and recent improvements in profitability, largely due to a significant turnaround in investment returns and improvements in some commercial lines, should be seen in that context.
Persistently high inflation and significant increases in reinsurance costs are continuing to increase costs for insurers into 2023. Home insurance is under particularly significant pressure – for every dollar collected in home premiums in 2022 insurers' costs were $1.04.
The sector has appreciated the opportunity to work more closely with ASIC to develop a clearer understanding of their view of specific obligations for general insurers. We note that the recent interim stop orders on some lines of pet insurance were in place for less than 24 hours, following immediate engagement from affected businesses with ASIC to make amendments to certain documents. The sector was pleased to see these interim stop orders lifted so quickly.
Insurers must carefully calibrate costs through volatile weather periods to ensure the product remains in reach of as many Australians as possible. We note ASIC’s recommendation on resourcing and will engage further with the regulator to understand what level of permanent claims staffing they consider appropriate, given that any ongoing increase will be a cost that is ultimately borne by customers.