Australia’s insurance sector is bracing for a slowdown in premium growth in 2025, following years of steep increases driven by inflationary pressures, natural disasters, and rising costs. Analysts and investors suggest the pace of price rises is moderating as inflation stabilises.
In 2024, insurers like IAG, Suncorp, and QBE delivered significant shareholder returns, bolstered by sharp premium hikes in home and motor policies. IAG posted a total shareholder return of 54%, while Suncorp achieved 44% and QBE recorded 34%, according to a Morgan Stanley analysis. These gains were largely attributed to a prolonged period of rising insurance premiums.
However, recent indicators suggest that the peak in premium growth may have passed.
According to a Brisbane Times report, Macquarie analysts noted that current conditions represent a high point for Australian insurers. Meanwhile, Morgan Stanley reported a deceleration in premium increases, which had previously surged at rates not seen in over two decades. Since late 2021, home insurance premiums have climbed 54%, with motor premiums jumping 56%.
Scott Olsson, portfolio manager at Firetrail Investments, anticipates slower revenue growth as inflationary pressures ease.
“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,” he told Brisbane Times, noting that affordability concerns remain for many households.
He added that insurance remains a necessity for most Australians, even as rising premiums strain budgets.
Figures from the Australian Bureau of Statistics (ABS) show that insurance premiums grew 11% in the year to November 2024, down from 14% in October. This reflects a broader trend of easing inflation, which reached its highest levels in early 2024.
AMP chief economist Shane Oliver noted that inflationary pressures, driven by supply chain disruptions and labour costs, had significantly influenced premiums in recent years. However, he expects growth to moderate further in 2025 if no major natural disasters occur.
“The cost of rebuilding a car or house has come down. Provided we don’t see any other natural disasters [in the short term], that slowdown of premiums will continue,” he told the Brisbane Times.
He also noted that double-digit rises remain possible, depending on economic conditions and claim trends.
While premium growth may slow, analysts see no indication that insurance prices will decline.
Hugh Dive, chief investment officer at Atlas Funds Management, said the industry’s profitability remains strong.
“The sector can show some great profits, unlike manufacturing it’s just selling promises – it’s not having to physically make anything,” he said, as reported by Brisbane Times.
He added that he expects companies like QBE and Suncorp to maintain steady performance in 2025, although major stock gains seen in 2024 are unlikely to recur. He also highlighted the defensive nature of insurance, suggesting it remains a key sector for investors despite slowing growth.
Despite expectations of slower growth in 2025, the Australian general insurance market is projected to expand significantly over the next five years.
According to GlobalData, direct written premiums (DWP) are forecast to reach $146.9 billion by 2029, up from $103.1 billion in 2025. This represents a compound annual growth rate (CAGR) of 9.2%.
GlobalData senior insurance analyst Sneha Verma attributed this growth to rising demand for natural catastrophe coverage, adjustments for inflation, and increasing vehicle sales. She noted that the sector’s performance in 2023 and 2024 had been bolstered by economic recovery and heightened awareness of climate risks.
However, challenges remain. Verma pointed to inflation-driven claim costs and higher losses from natural disasters as ongoing issues for insurers. These factors, she said, could weigh on profitability even as the market continues to expand.
