Monday, April 17, 2023

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Australia’s Insurance Industry: Key Trends and Insights from 2018-2022

The insurance industry has experienced significant growth and improvement in recent years, navigating challenges and opportunities in an ever-changing landscape. In this article, we delve into the key trends and insights driving the industry's positive trajectory, based on data from the past five years (2018-2022). From gross written premiums to capital ratios, we will draw on KPMG’s 2023 Insurance Industry Review to explore how the industry has evolved and what lies ahead.

1. Consistent demand for insurance products

Between 2018 and 2022, the insurance industry's Gross Written Premium (GWP) showed consistent growth, increasing from $44,111m to $59,364m. This represents a compound annual growth rate (CAGR) of approximately 7.7%, showcasing a robust demand for insurance products. With rising consumer awareness about the importance of insurance and the development of innovative solutions tailored to specific customer needs, this upward trend in GWP is expected to continue.

2. Steady increase in net earned premiums (NEP)

The industry's NEP has also shown consistent growth, rising from $31,217m in 2018 to $40,286m in 2022. This indicates that insurance companies are retaining a higher proportion of earned premiums, which could be due to improved underwriting or risk management practices. Insurers must continue to focus on optimising their portfolio mix and underwriting guidelines to ensure the sustainable growth of NEPs.

3. Mixed underwriting results

Underwriting results fluctuated significantly over the five-year period, with a substantial loss in 2020 followed by a strong recovery in 2022, reaching $6,125m. This suggests that the industry's underwriting performance has improved in recent years, possibly due to better risk selection or pricing strategies. To maintain this momentum, insurers should leverage advanced data analytics and predictive modelling to further enhance their underwriting capabilities.

4. Resilient insurance profitability

Insurance profit has generally increased over the period, barring a dip in 2020. This trend indicates that the industry has managed to maintain profitability despite fluctuations in underwriting results and investment income. In the face of growing competition and economic uncertainties, insurers must prioritise cost management and efficiency initiatives to preserve and enhance their profitability.

5. Volatile investment income

Investment income has been volatile, with a notable decline in 2022 to a loss of $1,257m. This could signify that the industry is grappling with challenges in generating returns on its investments, potentially due to market volatility or low-interest rates. Insurers could diversify their investment portfolios and consider alternative investment opportunities to mitigate risks and enhance returns.

6. Improving Loss Ratio

The loss ratio decreased from a high of 75% in 2020 to 62% in 2022, indicating an improvement in claims management and risk mitigation strategies. This positive trend can be attributed to the adoption of advanced technologies such as artificial intelligence, machine learning, and data analytics, enabling insurers to better predict, prevent, and manage claims. Continued investment in such technologies will be crucial for the industry to further optimise loss ratios.

7. Stable expense ratio

The expense ratio remained relatively stable over the five-year period, hovering around 23-25%. This suggests that the industry has been successful in maintaining its operating efficiency. However, as digital transformation accelerates, insurers should continue to invest in technology and automation to streamline operations, reduce manual processes, and ultimately, lower expenses.

8. Improved combined ratio

The combined ratio, which represents the sum of the loss and expense ratios, improved significantly from 101% in 2020 to 85% in 2022, indicating better overall underwriting performance. This improvement highlights the industry's efforts to optimise both claims management and operational efficiency. Going forward, insurers must continue to refine their underwriting and risk management processes to maintain favourable combined ratios and preserve long-term sustainability.


9. Rising insurance margin

The insurance margin, a measure of profitability, has generally been improving, reaching 12% in 2022. This upward trend suggests the industry has balanced growth and risk management to deliver higher profitability. To sustain this momentum, insurers must focus on product innovation, targeted marketing, and efficient distribution channels, all while keeping a close eye on risk management and cost containment.

10. Stable capital ratio

The capital ratio has remained relatively stable over the period, ranging from 1.67 to 1.74. This metric indicates that the industry has maintained adequate capitalisation to support its risk exposure. However, with changing regulatory requirements and potential market disruptions, it is essential for insurers to continually assess their capital adequacy and adjust their risk management strategies accordingly.



The insurance industry has experienced a positive trajectory over the past five years. However, challenges persist in generating investment income, and the industry must continue to focus on improving risk management and operational efficiency to maintain profitability.

As we look to the future, several factors will shape the insurance landscape, including advances in technology, demographic shifts, and evolving customer expectations. Insurers must be agile and adaptive, leveraging data analytics, artificial intelligence, and other emerging technologies to stay ahead of the curve and ready to respond to opportunities.

Prepared by Laurence Basell
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Honan Insurance Group Pty Ltd is now fully owned by Marsh Pty Ltd. To find out more, speak to your broker or read the announcement