Aussie Insurers suffering underwriting losses despite increasing investment income.

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Impact of Gross Incurred Claims:

The $100 million underwriting loss can primarily be attributed to gross incurred claims costs, according to APRA. The sharp rise in claims costs has led to a significant reduction in the industry's net profit, down 18% to $1.1 billion from $1.3 billion in the December quarter. Gross earned premium also decreased by 0.4% to $16.4 billion.

Despite this, there was a notable increase in investment income, rising 107% from $1 billion to $2.1 billion. For the last twelve-month period to March, the industry saw an underwriting profit of $5.3 billion as compared to the preceding year. At the same time, the gross earned premium rose by 9.4% to $64.4 billion. The net profit also tripled to $3.7 billion from $1.3 billion.

Reasons Behind Insurance Industry’s Performance:

The rise in net profits of the Australian insurance industry can be attributed to many factors. Nearly all classes of businesses recorded premium increases. These were substantial increases compared to the prior year and were driven by stronger underwriting results and a recovery in investment income. Also, investment income recovered to $2 billion after experiencing a loss of $900 million in the previous year. It is worth noting that the increase in investment income was driven by an increase in interest income and unrealised gains from interest-bearing investments.

Despite the overall increase in profits, KPMG insurance partner, Scott Guse, says the March quarter numbers are "not surprising”. There are many weather-related events during that period such as smaller floods, storms, etc., leading to underwriting losses. For instance, quarter one of 2021 saw a significant number of specific events impacting the industry. However, Guse added that the insurance industry should increase its prices to cover the reinsurance costs going up, which is causing concern.

The Australian insurance industry’s insolvency profitability margin is in question due to issues highlighted by the APRA report. Due to the increasing costs and a declining margin, most insurers need an overhaul in their business models. The industry needs to focus on reducing excessive costs and improving operational efficiencies to maintain profitability, starting with a risk management evaluation that considers operational, technological, or strategic risks that drive the claims costs upward.

Published:Friday, 26th May 2023
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Insurance News

Clear

Insuret and ATL Unite to Strengthen Australia's Truck Insurance Landscape

12 May 2026: Paige Estritori

In a significant development for Australia's transport insurance sector, specialist underwriting agencies Insuret and ATL have announced their merger, creating a unified national platform dedicated to fleet and trucking insurance. This strategic alliance is poised to address the evolving and complex risk demands within the country's transport and mobility sectors. - read more

Regulatory Scrutiny Intensifies Over IAG's Proposed Acquisition of RAC Insurance

12 May 2026: Paige Estritori

The Australian Competition and Consumer Commission (ACCC) has escalated its scrutiny of Insurance Australia Group's (IAG) proposed acquisition of Western Australia's RAC Insurance, initiating a second-phase review due to potential competition concerns. This development underscores the regulator's commitment to maintaining a competitive insurance market, particularly in regions where market concentration could adversely affect consumers. - read more

Australian Insurance Prices Decline as Global Conflicts Introduce Market Uncertainties

12 May 2026: Paige Estritori

Recent analyses by Aon indicate a notable decline in Australian insurance prices during the first quarter of 2026, with reductions ranging from 11% to 20% across various sectors. This trend is attributed to abundant market capacity and broader coverage options. However, escalating global conflicts, particularly in the Middle East, are casting shadows over the market's future stability. - read more

HESTA Announces Reduction in Insurance Fees to Benefit Members

11 May 2026: Paige Estritori

HESTA, a prominent Australian superannuation fund, has unveiled a significant reduction in insurance fees, set to take effect from 1 July 2026. This initiative aims to make insurance coverage more accessible and affordable for its members, aligning with the fund's commitment to enhancing member benefits. - read more

Hostplus and MetLife Australia Extend Partnership to Enhance Member Insurance Benefits

11 May 2026: Paige Estritori

Hostplus, a leading Australian superannuation fund, has announced the extension of its group insurance partnership with MetLife Australia until June 2028. This strategic move aims to elevate the servicing models across claims and underwriting, ultimately delivering stronger outcomes for Hostplus members. - read more

Click for more Insurance News