The general insurance industry’s after-tax profit climbed to $7.3 billion last financial year, its strongest result in more than a decade, driven by catastrophe losses falling below expectations and strong investment returns, actuarial group Taylor Fry says.

The result follows strong earnings a year earlier, when Australian Prudential Regulation Authority data was available for only three quarters due to accounting changes. Based on a comparable nine months to June 30 this year, profits rose by one-third to $5.2 billion. 

Taylor Fry, which today released its annual Radar report, expects escalating earnings will increase the focus on pricing practices and fairness, and consumers may raise questions amid affordability pressures.

Principal Scott Duncan says it is critical not to view insurance through a one-year window, as the industry experienced recent tough years, and catastrophe experience and investment returns may not be as favourable in future.

“By its very nature, insurance is a volatile business, and insurance acts as a shock absorber for households and the broader economy,” he said.  

Taylor Fry’s longer-term examination of share prices shows the sector has matched the broader market over a decade as it absorbs risks.

“Insurers will need to make sure they explain that longer-term view,” Mr Duncan told insuranceNEWS.com.au. “I think they’ve done a good job of that so far, but it’s an important part of the conversation.”  

Primary insurers recorded a $6.7 billion profit last financial year, with previous double-digit premium increases and reserve releases contributing.

Reinsurance earnings of $600,000 were strong despite a softening market. 

Mr Duncan says the householders line recorded an insurance service result of $1.16 billion, the strongest in more than 10 years, but APRA data shows a continued decline in risks written, with evidence consumers are raising excesses to offset cost pressures.

Domestic motor was strong amid favourable claim outcomes.

“There’s been a lot of talk about issues with supply chains, but we just haven’t seen the same sort of claim volumes come through,” Mr Duncan said. “No one is quite sure whether it’s a temporary thing or something that is going to be sustained.” 

The commercial property market is softening, while the renewable energy transition is increasing the focus on lithium-ion battery fire risks and solar panel hail damage.

Mr Duncan says artificial intelligence adoption is also receiving more attention, as insurers aim for quicker and more consistent outcomes for customers. “The focus is now switching to AI governance, data security and cyber risk management,” he said.

The Radar report is available here.