General Insurance Industry Review 2018: Highlights | KPMG | AU
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General Insurance Industry Review 2018: Highlights

General Insurance Industry Review 2018: Highlights

2018 has been a positive year for the general insurers, with profits for the year ended 30 June 2018 up 4 percent to $5,010 million, a further improvement on the previous year’s strong result. Our report reveals the key drivers of the strong results and delves into the top 10 emerging trends impacting the industry.

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Partner, Audit, Assurance & Risk Consulting

KPMG Australia

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The 2018 KPMG General Insurance Industry Review includes the financial results up to 30 June 2018 of all Australian general insurers. We focus on the key drivers, events, trends and factors that influenced the performance of the general insurance industry throughout 2018. We also highlight the top 10 emerging trends impacting the industry in 2019 and beyond. In this section we reflect on the implications of these current and emerging themes, which may require Australia’s general insurers to significantly adapt the way they do business.

Key insights

  • Whilst net earned premiums were up 2.3 percent to $30,832 million, reflecting strong premium increases being previously pushed through, gross written premiums (GWP) for the year actually decreased by 1 percent to $42,746 million. This decrease being primarily attributable to significant reductions in GWP coming from reforms of the NSW CTP scheme.
  • The cost discipline of insurers is continuing with a further 20 basis point decrease in the expense ratio to 24.6 percent. Although this improvement is in part due to pricing increases, the move to more cost effective distribution channels has been a key driver in reducing this ratio.
  • The loss ratio (claims cost) has improved in 2017/18 to 62.7 percent (an improvement of 0.8 percent). A largely benign weather environment was a key contributor to this improvement.
  • While the results for the year are positive the underlying insurance margin (overall insurance profitability) of 16.2 percent is still below the results achieved by the industry in 2012, 13 and 14, so there is still a way to go.
  • Investment income allocated to insurance funds was $1,117 million down 15 percent from $1,320 million in 2016/17 on the back of a low interest rate environment and conservative investment portfolios.

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