Insurance price hikes on the way
CONSUMERS should expect higher insurance premiums in the next year as providers work to recoup $600 million lost in Queensland's recent extreme weather events.
Ferocious hail storms and devastating floods in Queensland in the 2018-19 summer left a multimillion-dollar hole in the insurance industry, a KPMG report has revealed.
The insurance industry's profits fell 12 per cent to $4.4 billion in 2019, reversing the trend of increasing profits over the previous two years.
KPMG's General Insurance Industry Review said higher claims due to natural hazards, including hail storms in South East Queensland and floods in Townsville were partly to blame for the lower margins.
KPMG Insurance Partner Scott Guse said: "It's not significantly bad but it is a $600 million reduction in profit from last year."
Mr Guse tipped there would be "some impost on policy holders and customers" as a result of the hit to insurers' bottom line.
"Prices will go up for insurance and the reason they'll go up is insurance companies need to make a profit," he said.
He said the cost of repairing houses and cars was increasing, largely due to technology becoming more complex in both.
Climate change is also having an effect on insurers' bottom line, with last year described as an "extremely high year for global climate-related insurance losses".
"With the severity and frequency of climate change-related events increasing, insurers are now including climate science in their risk models," Mr Guse said.
"Insurance companies have a lot more accuracy with property locations and how water flows (in severe flood).
"They are able to better predict which properties will suffer.
"That pricing gets factored into the premium."
Mr Guse said insurers were discussing with all levels of government how to better prepare and protect against more frequent and severe natural disasters.
He said a flood levee built in Roma after the 2011 floods had reduced insurance premiums by up to 45 per cent.