Industry profitability is expected to ease after general insurers recorded a return on equity of 19% last financial year, their best result in a decade, Finity says.

The 2024-25 result was six points better than the previous year, driven by strong underwriting performance, high investment returns and benign natural peril activity, according to the consultant’s annual sector review.

“Insurers have delivered their strongest results in a decade, but beneath that strength lies mounting financial pressure,” Finity principal Pravesh Ponna said.

“Businesses are cutting back, households are feeling the pinch, and economic confidence is fading.

“The industry’s results tell us as much about the resilience of insurers as they do about the challenges facing Australia’s risk landscape.”

Finity’s Optima review predicts ROE will fall by six points to 13% this financial year, “returning to within the target range”, defined as 10%-15%.

Overall industry performance

“We expect continued moderation in premium growth over the coming year (and in some classes, reductions in premiums), which will place upward pressure on the combined operating ratio,” the report says.

The review is based on Finity’s analysis of Australian Prudential Regulation Authority data.

Gross written premium grew 6% in 2024-25, down from double-digit growth the previous three years due to lower rate rises across personal lines and soft conditions in several commercial classes.

Finity expects the GWP increase to slow to 4.5% this year.  

“The moderation of premium rates observed in FY25 is expected to continue … with premium growth slowing across most classes. Overall, we expect positive volume growth of 2% across all classes … Sum insured growth and rate increases are forecast to increase the premium base by a further 2%.”

Personal lines GWP grew 9% but is forecast to ease to 6% this year. Insurers are expected to face more moderate claims inflation. 

Householders GWP is projected to grow 9%; compulsory third party 10%; private motor 4%; and travel 1%.

Finity expects commercial lines GWP growth of 3%, similar to last year amid continued soft market conditions, especially in corporate and financial lines.

Premium reductions of 12% for corporate property and 9% for financial lines are expected this year.

“Corporate property has experienced a softening market … Premium reductions accelerated in the second half of the year due to excess capacity and an increased focus on volume growth, particularly at the higher end of the market,” the review says.

“Increased competition and the dramatic softening of the market will likely erode the underlying profitability for corporate property as claims costs normalise.”