KPMG have released their annual General Insurance Industry review findings for 2016, showing that the industry is making a comeback after a tough 2015.

While market conditions continued to be tough, especially in the commercial classes, insurance profits rose 18%, due to less natural catastrophes and a focus on cost savings.

Key findings in the report include:

• The industry expense ratio decreased marginally to 25.7 percent.
• The industry loss ratio has improved to 66 percent from 68.5 percent in 2014/15.
• The industry’s capital ratio is at 1.73 times the prescribed capital amount compared to 1.75 as at 30 June 2015.
• Competitive market conditions are expected to continue to put pressure on premiums, with forecast GWP expected to continue to be flat in the near term.
• Whilst the challenger brands continue to provide significant competition within the personal lines market, their rate of growth slowed this year.
• The industry having to stay agile by looking into newer product offerings to target those who may not be able to afford full coverage, such as lower coverage insurance

Some of the top emerging trends impacting the sector that were identified were:

• InsurTech – Insurers are looking for new technologies to improve their customer experiences, deliver innovative products and services and transform their business models.
• Driverless cars – All major automakers have driverless car development programs, and many automakers already have cars on the road with advanced driver assist technology.
• Telematics – Telematics can instantaneously tell an insurer where and how a policyholder drives. Telematics will eventually become the norm for the Australian motor vehicle insurance industry, and the benefits – especially price – will be too hard to ignore.
• Cyber insurance – A more sophisticated approach is needed. Policy wordings are complex, contain various exclusions and at present large scale risk transfer to insurers are not happening.
• Big data – Few Insurers are capitalising on the potential benefits data analytics can provide. Leveraging data will assist insurers in understanding the customer and their risks better.
• Sustainability – Unprecedented collective action to ‘create the world we want’ should see insurers step up.
• Conduct and culture – Customers continue to feel a sense of mistrust with the general insurers and examples of customer detriment continue to emerge. With increasing focus from ASIC, the media and consumers, it is clear that doing nothing is not option.

Over the next year in the GB Advantage, we will be featuring more stories regarding these top trends and the potential impact it may have on your business.

To discuss the findings and what impact it may have on your business, please contact us and for the full report please click here.