Insurance premium growth to finally abate if not fall, say Suncorp and IAG chief executives
Meanwhile, IAG New Zealand, which sells insurance via the AMI, State, NZI, NAC, Lumley and Lantern brands, as well as banks, collected north of 10% more in home insurance premiums.
The growth in both insurers' cases was driven more by them upping premiums than selling more policies.
As for motor insurance, IAG's motor premium collection fell, while Suncorp's only inched up 0.5%.
Both Higgins and IAG New Zealand chief executive Amanda Whiting suspected the cost-of-living crisis might have prompted people to cut back on the amount they drove.
Higgins also wondered whether households reduced the number of cars they had.
The chief executives of the two Australian-owned giants, which released their annual results this week, noted the story was quite different in the commercial insurance space.
Indeed, commercial insurance premiums fell during the year – with Suncorp collecting 5.3% less in premiums.
Higgins explained a number of new underwriters, including those part of the Lloyds of London network, entered the market after Cyclone Gabrielle and the floods.
With the incumbents forced to raise premiums to cover higher reinsurance costs and recoup losses from the events, the new entrants seized the opportunity to undercut them.
Higgins said there was a similar situation following the 2010/11 Canterbury earthquakes. The underwriters that didn't face the costs of those in the market during the disasters could come in and scoop up business by offering lower premiums.
IAG New Zealand chief executive Amanda Whiting draws attention to the cyclic nature of commercial insurance. Photo / Supplied
Whiting described the situation as being cyclic.
Higgins said the value of the big incumbents was that they were in the market for the long haul. They had established networks and weren't going to exit the market after expensive events.
He said businesses under pressure due to the tough economic environment were trying to save money by agreeing to pay larger excesses.
He also noted Suncorp had taken a knock by government departments watering down their insurance cover to save money, but this exposed the Crown's balance sheet to greater risk.
Despite the market being soft, a year of relatively good weather helped both insurers grow their profits substantially in the year to June.
Suncorp reported a A$457 million ($501.6m) insurance trading result – a 95% increase from the previous year.
IAG New Zealand reported an insurance profit of A$606m – a 33% rise from the previous year.
Jenée Tibshraeny is the Herald's Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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