Insurance Australia Group, the country's largest general insurer in the domestic market, expects its insurance profit for the first half-year ended 31 December 2009 to be more than double what it achieved the year before.
The general insurer expects that it will post an insurance profit of A$488 million (US$422 million) when it reports its half-year result on 25 February, significantly higher than the A$227 million it achieved last year. The results, representing an improved insurance margin of 13.4%, up from 6.2% a year ago, follow a reduction in claims costs and favourable credit spreads on its fixed-rate investments.
The insurer has also flagged a stronger than expected full-year insurance margin. For the full year, IAG's insurance margin is expected to be between 11.5% and 13%, up from previous guidance of 9-11%.
IAG Chief Executive Michael Wilkins attributes more than half of the growth in the insurance margin to operational improvements. "Our performance has also been aided by narrowing credit spreads and natural peril claim costs below our allowances, particularly in November and December, which traditionally experience more weather events," he said.
Underlying gross written premium, a standard measure of insurance revenue, is expected to be up 5% for the half-year, when excluding divested businesses and the impact of foreign exchange movements. Reported gross written premium is likely to reduce by approximately 1.5%, IAG says.
General insurers are likely to benefit as weather patterns change from La Nina (wet) to El Nino (dry) because there would be fewer storms and less flooding, reports The Australian newspaper citing Tyndall Investment Management Analyst Jason Kim.
Australia has been experiencing an El Nino effect since June last year, and the event is expected to run to April this year.
Mr Kim said: "Bushfires are an issue, but wet weather is generally far more damaging and for an insurer, El Nino is preferred for that reason." He added: "In the case of bushfires, they do tend to be contained and they tend to be in rural properties as well, which are of less value."
"Wet weather can damage a lot of houses in the city, and roofs, and increases the frequency of claims on cars," he said.
Australia is prone to bushfires, cyclones, hail, storms, drought and flood. In 2008, severe weather events cost the insurance industry at least A$2.2 billion (US$1.9 billion) in insured losses. Since 1967, 19 out of the 20 largest property insurance losses in Australia have been weather related.
Home insurance supplier, NRMA Insurance, is calling for gamers in New South Wales to play it safe, after research reveals that a third have accidentally lost control of their remote or controller while playing an electronic game. The insurer says that safe gaming has become an emerging insurance issue, as it has seen a number of claims among New South Wales residents, half of whom now spend up to five hours per week gaming.
NRMA Insurance spokesperson, Ms Emily Gatt, says that injuries from gaming like numb thumbs and shoulder strains are almost worn with pride among gamers, but causing damage to property in the home like the TV set or even mum's favourite vase can be a hassle.
"Almost 30% of people have damaged property in their home as a result of losing control of their gaming remote. And yet, despite this, almost 60% of us admit to not always strapping our remote to our wrist," said Ms Gatt.
She says that the research also shows Gen Y to be the state's most avid gamers and adds that one in four admits to getting so frustrated while playing games that they have thrown their controller. "In most cases people are probably getting overly excited and losing control of their remote; however we did find a considerable percentage of young gamers throwing their controller out of frustration," said Ms Gatt.
"Electronic games can provide hours of fun, but we just ask that people try to avoid damage in the home by staying aware and following some simple safety advice," she said. "We'd also suggest that people with a gaming console take up the option of accidental damage on their home insurance policy so their contents are covered," she added.
As Australia marked the first anniversary last Sunday of devastating bushfires in Victoria - the country's worst natural disaster which killed 173 people - the nation's peak insurance body is putting pressure on the Victorian Bushfire Royal Commission to axe the fire service levy (FSL).
The Insurance Council of Australia (ICA) has made its second submission to the commission, "calling for the abolition of the FSL", which is added to all house insurance premiums. ICA spokeswoman Sandra Van Dijk says that Victoria's FSL represented almost 80% of total home insurance fees.
The Metropolitan Fire Brigade and the Country Fire Authority "rely on insured consumers for the bulk of their funding" via the levy, the submission states. "We think the current funding model is not fair," Ms Van Dijk said.
"We have put forward alternative models including the fact that most state governments have moved to systems where fire and emergency services' levies are collected through charges on property value rather than insurance premiums," she said.
Australia's largest home indemnity insurer to withdraw from building market
Vero, Australia's home indemnity industry's largest player, has said that it is withdrawing from the market, with the decision triggered by the New South Wales Government saying that it would take over the underwriting of insurance. The insurance is designed to protect homebuyers against defaulting builders and structural defects on new homes and renovations.
"After a thorough process where discussions were held with various state governments and all alternatives and operations were considered, Vero has determined that it has no choice but to withdraw from the national home warranty market," the company said in a statement.
Vero's decision to forego its home warranty insurance operations from 30 June will create uncertainty, and a lack of competition which could threaten the rest of the sector, warns Mr Wilhelm Harnisch, Chief Executive of the Australian Master Builder's Association.
He added: "In the broader sense, the degree to which the withdrawal of Vero from this part of the home warranty insurance market is affecting the industry is vital. Without this, builders cannot operate, and this could influence what other state governments may do."
The remaining four state governments now face the decision of whether to enter the market. Home warranty insurance is required in these states for builders, who must have the product as a licence requirement. Vero’s withdrawal leaves only QBE and Calliden as the major players in the market. If the state governments do not enter the sector, QBE could emerge as the dominant provider of insurance with a strong market share.
