Forget about rate rises: Aon

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8 March 2010

The head of Australia’s largest insurance brokerage has refuted reports that premiums are hardening, instead depicting the coming two years as a buyers’ – not sellers’ – market.

Aon Australia CEO Steve Nevett – whose company controls about 20% of the Australian broking market – says while insurers are attempting to push through price rises, talk of a hardening market is wishful thinking because there is surplus capital and plentiful capacity.

“I think the run over the next 12 to 24 months is going to be pretty good for clients,” he told insuranceNEWS.com.au.

“At the moment, in this country, with interest rates recovering and insurers’ investment income more reliable, overall (weather incidents) have been pretty benign. I don’t see anything that is going to send premiums up.”

Mr Nevett’s comments follow the recent release of the annual JP Morgan Deloitte survey, which stated premiums rose in commercial classes by an average of 4% in 2009 and tipped further rises for this year.

He says some insurers resort to strong-arm tactics when “informing” brokers of across-the-board rises, but they usually have little success.

“I liken that to Bob Hawke saying no child shall live in poverty and the guy from IBM saying the world would only need 24 computers.”

Mr Nevett also says while the insurance cycle will remain, the longevity of its phases is changing.

“It’s always been about a seven-year cycle,” he told insuranceNEWS.com.au. “What I think has changed is that the ‘hard’ part of the cycle has got a lot shorter and the ‘soft’ part has got much longer.

“Once you would get a year of hardening, two years hard, a year of coming off a bit and then two or three years of soft. Now you get two years of firm and five years of soft.”