Growth in capacity and increasing interest from international markets means the recent run of reducing premiums in Australia may well continue but to ensure insurers continue to grow regardless, they must diversify.
Following the release of Aon Risk Solutions Australia's Insurance Market Update for Q1, CEO Lambros Lambrou
said this raises the question of whether Australian insurers are prepared to meet the challenge and diversify by developing new products.
Lambrou also pointed out that insurance markets in general are becoming increasingly attractive investment opportunities for alternative capital, such as pension funds, which are actively seeking greater returns and further diversity for their investors.
“For buyers, this adds to an already competitive environment,” Lambrou said. “So for the insurance market, the big question becomes: when will it genuinely start using profits derived from the relatively benign claims environment to develop innovative products for traditionally uninsurable risks, rather than simply banking the difference?”
According to Lambrou, future success for the insurance market lies in its ability to innovate by anticipating and meeting client needs in an ever changing risk landscape.
Lambrou cited network security and privacy insurance policies as a recent example of product innovation: “Five years ago organisations were completely exposed to cyber risk. The insurance market just did not cater to this very real and constantly evolving risk. Now the market offers specialist cyber risk insurance policies to adequately mitigate risk; opening itself up to an entirely new segment of the market that was up until recently uninsurable.”