Bad Weather blamed for increase in Insurance premiums

Bad weather has been blamed for an increase in insurance premiums, the rise is also due to an increase in competition. It has been revealed though that the industry is still in good financial standing due to improved economic conditions and increasing interest rates that also increased investments.

Competition in insurance policy costs will be stiffer because the small players in home insurance and car insurance are experiencing expansion. Though their market is quite low presently, it is very likely that they will gain a stronger customer base which will change the competition in the personal insurance industry.

Commercial insurance competition is still high which means there will be slower commercial insurance premium growth which is beneficial for businesses, it is also important to note that the ongoing Australian economic boom will trickle to the insurance industry in the coming year.

Discipline in underwriting must be maintained for the returns in the investment markets might not be as strong as expected. Some of the major insurance companies in Australia continued to perform well in the first half of 2010 despite harsh weather conditions in March.

The storms that ravaged Melbourne, Perth and Western Queensland caused damage worth about $2.1 billion to the insurance industry. This has been the highest annual weather cost for the insurance industry since 1999 when a hail storm in Sydney took $1.7 billion from the industry. Despite the high claims costs, the insurance industry posted a 10 percent profit increase in the first half of 2010 of $3.5 billion.

Insurance margins also went up from 11.5 percent in the same time last year to 14.5 percent due to the higher insurance premiums and the stable interest rate of the Reserve Bank of Australia. Insurance premium increases in car insurance and home insurance proved to be the highest and the trend will continue due to more severe weather conditions expected in the coming months.