Since the Australian insurance system is based both on state support, as well as on private contributions, at least where health insurance is concerned, the news that prices for coverage are expected to increase across the board are likely to send many into a frenzy. According to the most recent poll released by JP Morgan and Taylor Fry, the General Insurance Barometer, industry representatives estimate that prices for private insurance companies will increase on most market niches. On the one hand, local insurers might be looking at this perspective with a renewed sense of optimism, since current economic conditions have been causing the market to stagnate for quite a while now. On the other hand, the general population needn’t worry too much about unaffordable insurance: competition is close on the lead of the main market players. Online providers such as Help Me Choose and companies from overseas are set to come in and tip the balance more toward affordability, while also making the insurance industry more competitive.
Why Will Private Insurance in Australia Become More Expensive?
Without a doubt, because of staff costs, say absolutely all the respondents in the JP Morgan survey. 100 per cent of the company representatives polled indicated that the current business scene is making it hard for them to hang on to trusted employees. They also decried a lack of fresh, young, new faces in their ranks. While good staff is proving hard to come by and even harder to hang on to, business isn’t looking so great either, as Australia just ended a year with fewer disasters than ever. In turn, this also caused the ratio of both domestic and commercial policies to drop, from 98 per cent to 89 per cent, and from 106 per cent to 98 per cent, respectively.
Signs of Hope on the Horizon
While industry experts forecast that ratio will drop to 90 per cent from 98 per cent overall, in 2013, they are not pointing to too dire a situation for the insurance industry as a whole. One analyst cited said that, all in all, the insurance industry is facing a reasonably good year ahead. Some of the most important increases are expected to come from the segments of households and domestic motor insurance policies, which the poll expects to see rising by 12 per cent and 4 per cent respectively. Different areas are also set to see growth in various sectors, with a 6 per cent rise in compulsory third party insurance in New South Wales and a 7 per cent rise on the same segment in Queensland.
Commercial policies are also expected to see their fair share of increases. Policies for insurance against fire and special types of industrial risk are expected to grow by 7 per cent, commercial motor insurance by 4 per cent and policies for liabilities (both public and for products) by 3 per cent. Similar raises are also expected in the fields of professional indemnity (3 per cent) and cover for directors and officers (4 per cent). Regionally speaking, Western Australia is likely to see a 4 per cent increase in workers compensation, while Tasmania and the Northern Territory are each looking at 6 per cent growth on the same niche.
What’s Working versus What’s Not Working on the Insurance Market
All in all, long-tail insurance lines seem to be the main reason behind the improvement in ratio that last year brought on. That’s mostly because such lines come with low interest, which tends to make a big difference in a context of a lack of increase in premiums. Liabilities for the public domain and for products, as well as compulsory third party coverage and fire protection policies were found to be the most profitable niches across the board – and will probably remain so for 2012 as well.