The 2017 Optima report, Finity's annual health check of the Australian general insurance industry has revealed FY18 should feature expanding margins, hardening rates in commercial lines and improved profitability in Motor.
“This year’s Optima report shows FY17 was a reasonably good year for the industry, with an insurance margin reported of 14% and an ROE at the same level. This outcome was assisted by another year of strong reserve releases (adding around five points to the margin), with lower expenses also playing their part, ” said Finity Consulting Principal, Andy Cohen.
“Looking forward, we see some modest expansion of margins. This will be generated by further rate hardening in commercial lines, an industry response that improves Motor profitability and some ongoing reductions in expenses. In addition, prior year reserve releases from long tail classes will continue to prop up reported margins – although not necessarily at the levels we have seen in the past few years,” he added.
“The clear fly in the ointment though is CTP where we expect premium volumes and underlying current year profitability to decrease significantly.”
Optima is Finity’s key ‘state of the industry’ document. This report continues Finity’s longstanding tradition of investigating the recent and future performance of the Australian general insurance industry.
For an an easy-to-read summary of the Optima 2017 Report download Optima Lite.