Australian Business Insurance Claims Exceed $7.8 Billion, Revenue $27 Billion

| February 25, 2012

February 25, 2012 ( In 2011, the Australian Prudential Regulation Authority (APRA) published its most recent publicly available online statistics, which demonstrate that the general insurance industry earned an aggregate sum of $27.8 billion (AUD) in net premium revenue in the previous fiscal year. 41.2% of this revenue arose from compulsory third-party, houseowners’ and householders’ insurance policies and domestic motor vehicle insurances — the typical types of general insurance policy purchased by the public, many of them mandated by law. Popular lines of business insurance, on the other hand, accounted for a mere 16% of the general insurance industry’s total earnings over the latter two quarters of the year.

This is interestingly juxtaposed by updated reports of outstanding claims in excess of $7.8 billion, according to the APRA’s adjusted half-yearly statistics. Outstanding claims of the public and product liability insurance sector — which cover losses incurred as a result of a company’s products or employees — approached a net figure of $4.1 billion. Clearly, public and product liability insurance policies held by large corporations continued to account for the vast majority of outstanding claims for lines of business insurance as reported by the APRA in 2011. In the coming fiscal quarters, businesses interested in acquiring a public and product liability insurance policy in 2012 would do well to bear in mind the volume of unpaid claims reported by the APRA in 2011.

Other lines of business, such as and employer liability and commercial vehicle insurance, displayed similar growth and claims statistics in the 2011 report. Most notably, employer liability insurance, which includes compulsory workers’ compensation, showed a similar figure for outstanding insurance claims over the last half of 2011. Small businesses and corporations alike continued to assume the expanding burden of workers who have fallen out of the workforce in the previous year — a further sign of persistently stagnant economy and high unemployment.

australian-life-insurance However, employer liability insurance claims remained one of the most expensive insurance costs for small businesses compared to the cost for corporations. Despite this disparity, a total of $3.2 billion in employer liability claims remained unresolved according to the APRA’s statistics. These disproportionate outstanding claims are indicative of the trajectory within the general insurance industry to contest the most cost
ly liability losses even when revenues are high. This in essence passes on the aggregate cost of employer liability on to small businesses.

The commercial motor vehicle insurance sector reported a mere $428 million in outstanding claims, despite accounting for 5.7% of total revenue within the general insurance industry. These figures derive from the fact that the vast majority of claims against lines of commercial vehicle insurance are settled relatively quickly compared to liability insurance.

Other common types of business insurance such as fire and industrial special risk (ISR) policies accounted for a similar proportion of revenue the APRA’s annual report stated. $672 million in net outstanding claims remained unresolved in 2011, comprising 6.3% of the insurance industry’s net premium revenue. As such, the disparity between aggregate premium revenue and outstanding claims for the most popular lines of business remained flat when compared to previous publications by the APRA. These figures are indicattive of a general insurance industry which is still just as profitable as in former years.

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Category: SmallBiz News

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