APRA releases general insurance claims statistics

APRA releases general insurance claims statistics | Insurance Business Australia

APRA releases general insurance claims statistics

The Australian Prudential Regulation Authority (APRA) has released its annual industry-level general insurance claims development report for 2020.

For CTP motor vehicle claims in the 2020 accident year, APRA estimated an 84.1% ultimate loss ratio – in line with 2018 and 2019 accident years, but lower than prior accident years at the same stage of development.

APRA also found significant reserve releases consistently occurring across all prior accident years, albeit at lower levels than in recent financial years. These were mainly concentrated within the accident years up to five years prior.

For public and product liability during the same period, the estimated ultimate financial loss ratio of 55.9% was in line with recent accident years at the same stage of development. APRA also found some reserve strengthening across recent accident years.

“Reserve strengthening is noted for 2020 and 2019 financial years and is in contrast to reserve releases across prior financial years,” APRA said in the report.

For professional indemnity in the 2020 financial year, APRA reported an estimated ultimate loss ratio of 67.0%, slightly above the 2019 level at the same stage of development – with premium increases offset by increases in expected future claims.

The regulator also found reserve strengthening across all recent accident years, which aligned with an increase in class actions.

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For employers' liability in the 2020 financial year, APRA's report revealed a 73.6% estimated ultimate loss ratio, slightly lower than recent accident years at the same stage of development and driven by premium increases.

The report noted a significant transactional impact on the 2015 accident year data, adding that “excluding the impact of this transaction, the ultimate loss ratio for the 2015 accident year would be approximately 75%.”

For homeowners and householders, APRA reported an estimated ultimate loss ratio of 81.0%, higher than the 10-year average of 59.0% – mostly due to the negative impact of natural catastrophes on insurers' claims costs.

“Given the short-tail nature of claims in this class of business, the ultimate claims cost estimate for any particular accident year does not develop much over time,” the report said.

For domestic motor vehicle claims, APRA reported an estimated ultimate loss ratio of 64.4%, lower than the 10-year average of 66.9%. The regulator said the latest figure resulted from a reduction in claims frequency from the community lockdowns initiated by the government in response to the COVID-19 pandemic.

APRA also noted that fire and ISR claims for the 2020 accident year resulted in an estimated ultimate loss ratio of 92.4%, above the 10-year average of 77.7% and driven by revised provisions for pandemic-related business interruption (BI) claims at the end of December 2020.

“This represents the BI provisions reported by insurers with December 31 balance dates only, as claims development data is submitted to APRA annually and following the insurers' balance date,” APRA added.

Lastly, APRA's estimated ultimate loss ratio for commercial motor vehicle claims was 61.0%, slightly lower than the 10-year average of 68.8% – continuing a recent downward trend due to premium growth and the pandemic-related reduction in claim frequency in 2020.