TRANSCRIPT
In 2024, Australia's insurance industry recorded an annual after-tax profit of $6.1 billion.
That's three times higher than the five-year average of $2 billion.
According to an annual review of the sector from consultancy firm KPMG, hiked up premiums, calmer weather and surging investment markets have all contributed to the boom.
In 2024, the average customer paid 19.3 per cent more for home insurance and 12 per cent more for car insurance than they did the previous year.
So, if insurers are seeing such big profits, why are consumers still seeing insurance premiums rise?
Mark Blades is an insurance analyst for consumer advocacy group Choice.
He says companies often justify premium hikes by pointing to external factors.
“They point to a lot of external factors. So looking at cars for example, we don't make cars here in Australia, so we're reliant on overseas supply and those supply chains being disrupted, local parts manufacturers, but also external parts manufacturers. So insurers will definitely point to those delays and complex supply chains and also what's happening in world trade at the moment, it's quite a bit of a mess to put it bluntly. So yes, it's quite easy to point to those external factors. In saying that look for consumers, it's always important not to take these things on face value year on year, when you're getting your insurance renewals, you should always be shopping around to see what better values you can get to put the pressure back on insurers to make sure that they are not just taking the mickey with their increases.”
While the KPMG report says a return to positive profits may signal an end to double-digit premium hikes, it also says climate change means it's impossible to know what's around the corner.
The review has found the annual premium revenue jumped from $65.5 billion in 2023 to $68 billion in 2024.
Julia Davis is the Senior Policy and Communications officer at the Financial Rights Legal Centre.
She says that while climate change may mean less profit from home and content insurance, it isn't the whole picture.
“I think when we're looking at these big profits, what we're seeing is a reflection of profits across all their types of insurance, you know, whether it's cyber insurance or liability insurance or, you know, any number of other products, mostly commercial stuff. They're making a ton of money, and they claim they're not making a lot of money on, you know, consumer insurance, home and content. But, you know, I would challenge that. The truth is, insurance pricing is really opaque. You know, we don't understand it. We don't get to see it. It's not transparent at all, and it's pretty frustrating for consumers when your prices keep going up and up, and there is just no explanation. Is it because your house is more dangerous, you know, is there a new flood map you don't know about, you know, why is the price, increasing so dramatically?”
Mark Blades says insurance companies often find loopholes in the system, allowing them to increase premiums even more.
“Yeah, so looking to health insurance, this is a really regulated market. There's billions of dollars going in subsidies and billions more indirectly through tax incentives going from government coffers into the health funds. We also know that there's a number of loopholes that the health funds use to increase premiums far higher than the averages suggest. We also know that there's perhaps some issues with transparency in terms of people being told in the news that they have an average increase of this, but they're actually getting a 12 per cent increase higher than they thought. So look, there's always plenty that the governments can be pushing to do with pushing for greater transparency and regulations there. “
Meanwhile, the Climate Council has released a report revealing how areas at high risk of climate disaster will continue to see rising premiums.
The report, titled At Our Front Door, says the increasing frequency and severity of climate related disasters in Australia is driving up insurance premiums across the country.
The review by KPMG says that with only two significant weather events and no weather catastrophes in 2024, insurance companies generated $566 million in losses from 49,000 claims.
This marks a significant drop from 2023, which saw $2.356 billion paid out by insurance companies across over 143,000 [[143,900]] claims from catastrophes and significant events.
Andrew Hall is the CEO of the Insurance Council of Australia, he says without adequate measures to address climate resilience, the cost of home insurance will continue to rise.
“Well, we see it in the profit of insurance, insurance profits in Australia over the last five years. Three of those years, we've seen significant losses, particularly in home and contents, all driven completely by weather events. We've had a rapidly rising population. Those homes are growing often on the east coast on cheap land. That land is cheap for a reason. It floods. That comes with a cost when it comes to insuring those properties. So as we move forward in Australia, when we're talking about housing more and more people, we need to make sure that those homes are built in safe locations, in locations that don't flood, where the assets can remain intact for a longer period of time than just five years.”
For consumers, Mark Blades says simply looking around at different options online can save hundreds.
“Always be shopping around at every single year's renewal notice. Look, if I told you you could save hundreds of dollars just for say half a day's work, you'd probably be doing it right if you're looking at an hourly rate. And that's true if you're thinking about your home insurance, car insurance, health insurance, if you have it. Just looking at those three things that can be hundreds of dollars in savings you can make in just a few hours. And that's just by going online. Choice has comparisons for this, making sure you're looking at equivalent cover or less cover if you need it. And making sure as well when you're comparing insurers that you actually are looking at different competitors.”
For the insurance industry itself, Julia Davis says more oversight is needed.
“So we've been calling on government to establish a permanent National Insurance pricing monitor. We just think the general insurance industry is not meeting community expectations when it comes to pricing and needs more oversight”
