Australian Insurance Market Anticipates Slower Premium Growth in 2025

During 2024, major insurers such as IAG, Suncorp, and QBE reported significant shareholder returns, bolstered by sharp increases in home and motor policy premiums. For instance, IAG achieved a total shareholder return of 54%, while Suncorp and QBE recorded returns of 44% and 34%, respectively. These gains were primarily driven by aggressive premium adjustments in response to rising costs and claims.

However, recent analyses suggest that the peak of premium growth may have passed. Macquarie analysts have noted that the current conditions represent a high point for Australian insurers, with expectations of moderating premium increases as inflation stabilises. Morgan Stanley's reports also indicate a deceleration in premium hikes, which had previously surged at rates not seen in over two decades. Since late 2021, home insurance premiums have climbed by 54%, and motor premiums have increased by 56%.

Scott Olsson, portfolio manager at Firetrail Investments, anticipates slower revenue growth as inflationary pressures ease. He remarked, "It's better than the other years, but we'll probably still see increases... it's a product that's hard to justify dropping, so it's quite a defensive product, but for lots of people it is tough to afford." This statement underscores the delicate balance insurers must maintain between profitability and affordability for consumers.

Data from the Australian Bureau of Statistics (ABS) supports this trend, showing that insurance premiums grew by 11% in the year to November 2024, down from 14% in October. This decline suggests a cooling in the rapid premium growth observed in previous years.

For real estate professionals, this anticipated slowdown in premium growth could have several implications. Firstly, it may lead to more stable insurance costs for properties and assets, aiding in financial planning and budgeting. Secondly, the moderation in premium increases could reflect a broader stabilisation in the market, potentially influencing property values and investment decisions.

However, it's essential for real estate agents and property managers to remain vigilant. While premium growth may slow, the underlying risks associated with property insurance—such as exposure to natural disasters and compliance with regulatory requirements—persist. Therefore, maintaining comprehensive and tailored insurance coverage remains crucial to safeguard against potential liabilities and ensure business continuity.

In conclusion, the Australian insurance market is poised for a period of moderated premium growth in 2025. This development offers a reprieve from the steep increases of recent years but also necessitates continued diligence in risk management and insurance planning for real estate professionals.