APRA leader calls for improving general insurers’ financial health

APRA leader calls for improving general insurers' financial health

APRA leader calls for improving general insurers’ financial health | Insurance Business Australia

Insurance News

APRA leader calls for improving general insurers’ financial health

Regulator also aims to ensure Aussies have access to affordable insurance

Insurance News

Roxanne Libatique

Australian Prudential Regulation Authority (APRA) executive board member Suzanne Smith has called for improving the general insurance industry’s financial health.

In a speech delivered to attendees of this year’s Insurance Council of Australia (ICA) Annual Conference, Smith emphasised the significance of achieving appropriate balance between insurers’ financial health and ensuring policyholders have access to affordable and well-designed insurance.

“As a prudential regulator, APRA wants the insurance industry to be strong. In line with our mandate, we need to ensure that insurers can meet their obligations in the wake of disasters like last year’s flooding in Northern New South Wales and Queensland, which cost the industry $6 billion. But we’re also conscious that, like any businesses, insurers will withdraw products or exit the market altogether if they believe the benefits are not worth the risk,” Smith said. “We’re already seeing signs of this in higher-risk parts of Australia where many smaller insurers simply refuse to offer cover, thereby reducing consumer choice and the benefits of competition. This also has the potential of increasing the risk of adverse selection for those insurers that remain.”

Factors contributing to imbalance

Smith outlined several factors contributing to the imbalance between insurers’ financial health and Australians’ access to affordable insurance.

“The factors contributing to the current dilemma are complex and multifaceted, ranging from the impacts of climate related events to inflation and higher reinsurance costs,” Smith said. “One such challenge relates to the physical and financial risks of climate change, which insurers need to face head-on given the increasing frequency of extreme weather events.”

See also  Members Health sees surge in young people taking out private health insurance

As the industry faces a myriad of challenges, Smith called on insurance companies to be responsible for managing their businesses.

“Insurers need to be at their best to ensure the industry is supported to thrive. We are facing into an evolving operating environment with technological innovation at the core of some of the most significant developments. For insurers, artificial intelligence and telematics have the potential to be game-changing in terms of managing risk, gaining efficiencies and – hopefully – passing savings to policyholders. But with innovation comes risk, and those risks aren’t always apparent until after the fact,” she said.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!