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Suncorp chief executive Steve Johnston expects the insurer will keep raising home insurance premium offers by about 15 per cent in the year ahead, blaming a record-breaking year of disasters and surging building costs.
The giant behind brands including AAMI, GIO and Apia on Monday said its expenses from claims had jumped sharply due to a wave of wild weather, higher reinsurance bills, and a blowout in the cost of building supplies and second-hand cars.
In response it is jacking up premiums, most sharply in home insurance, where Suncorp’s premium offers are increasing in the “mid-teens”, in percentage terms. Johnston said that when customers were offered a premium rise of this size, many opted to dampen the impact by paying a higher excess, so the amount that customers actually paid (known as average written premium) had jumped by 9.9 per cent.
Lismore was affected by catastrophic flooding this year. Credit:Natalie Grono
He said the cost of insurance would probably keep rising at a similar pace over the year ahead, pointing to the wave of natural disasters over the past year.
“It’s hard to tell, but I think that if you think about the fact that we had 35 big events last year and significant increases in our reinsurance program and allowances, I suspect it will be something of a similar proportion,” Johnston said.
Net profit after tax fell 34.1 per cent to $681 million, as earnings in its flagship insurance arm dropped sharply because the company exceeded its allowance for natural disasters by $101 million.
“Certainly it’s the biggest natural hazard year we’ve had and that flooding event in February was the biggest event we’ve ever dealt with as a company,” he said.
Johnston also said the company was putting through “high single-digit” rises for motor insurance premium offers. He pointed to the surge in second-hand vehicle costs and the expense of replacing more sophisticated technology in modern cars, such as sensors in bumper bars.
When asked by an analyst how rising insurance costs would affect affordability, Johnston acknowledged that premiums had been rising sharply in recent years, but said the company was not seeing signs of consumers dumping insurance cover.