Insurers Warn Of Increases In Rates
Sydney Morning Herald
Monday May 11, 1992
Consumers have been warned that the era of cheap insurance rates is over as the battered Australian insurance industry struggles to repair its collective balance sheet.
Rates have increased by up to 15 per cent in recent months in some classes as insurance companies have sought to recover losses from the string of natural disasters that have plagued the industry over the past two years. Companies are also being squeezed by lower investment returns as a result of the fall in interest rates and some big increases in reinsurance rates around the world.
The chief executive of FAI Insurances, Mr Rodney Adler, said his company had just completed negotiating reinsurance contracts for several lines at an average increase of 40 per cent on last year. Mr Adler said the increase, which came on top of a 30 per cent increase last year, reflected a sharp reduction in underwriting capacity and a higher aversion to risk as the international industry recovered from one of its worst periods in history.
Three leading general insurers, Mercantile Mutual, QBE Insurances Ltd and FAI, yesterday said Australian consumers had enjoyed some of the cheapest insurance rates in the world in recent years, but this had ended.
Reflecting the improved outlook for the industry the Dutch-controlled group Mercantile Mutual yesterday reported a 44 per cent lift in March-half profits to $21.2 million.
Managing director Mr Paul Shirriff said the result reflected a big improvement in general insurance, which more than doubled profits to $8.5 million, and was due to higher rates, lower costs and the absence of any major catastrophes in the past six months.
Mr Shirriff said increased rates would benefit both consumers and the insurance industry in the long term. He said the trend towards greater industry concentration, such as the purchase of Australian Eagle by Lend Lease and QBE, would mean higher rates in the future.
The general manager of QBE's Australian operations, Mr Richard Maltby, said the Australian customer had had it "too cheap for too long", but it was in the long-term interests of the industry to have fewer, but more financially robust, operators.
QBE had increased commercial property rates 10 to 15 per cent last year and would increase them by a similar amount this year.
© 1992 Sydney Morning Herald