Australian insurance market trends

Date: Tuesday, February 1st, 2022 by dev.login.

The year 2021 presented many challenges and opportunities for the global insurance market, and it is anticipated that 2022 will be no different. On an encouraging note, many in the industry are predicting positive growth in 2022 despite the continuing shadow cast by COVID-19. The issues that defined 2021 will remain front of mind for Australian insurers for 2022 – sustainability, talent, regulation, digitisation, cyber security and evolving consumer preferences. The areas of sharp focus include:

Cyber

Accelerated digitisation and an uptick in the use of artificial intelligence and big data has led to a rapid rise in cyber attack and ransomware incidents in Australia. Insureds are grappling with increasing government and public scrutiny and related increases in regulatory pressures. This rapid acceleration also creates the conditions for potential increases in third party litigation and associated directors’ and officers’ claims.

Regulation

More broadly, regulation will remain a challenge for insurance players. One example is the finalisation in late 2021 of new targeted and principles-based design and distribution obligations for product issuers and product intervention powers (enabling the regulator to make prohibition orders in respect of prescribed products).

Talent

The war on talent across all areas will impact the employment landscape, characterised by employees demanding hybrid / remote working arrangements and employers needing creative responses to both attract and retain talent.

Climate

With a current annual cost of $38bn attributed to natural disasters, Australian insurers remain committed to a proactive approach to climate resilience, including incorporating environmental considerations in investments, underwriting and risk management, strategic alliances, and catastrophic reinsurance programmes. Insurability and/or affordability of insurance coverage has reduced quite significantly in some Australian regions, leading to a recently introduced government-backed reinsurance pool for cyclone damage.

Class actions

Legislative reforms are currently in train to further increase regulation of class action litigation funders (including introducing a cap on their ability to recover from the proceeds of settlement). Late 2021 saw a swift rise in class actions, but this is expected to decline in 2022 if the legislation is passed.

Australian insurers are also eagerly awaiting the Full Federal Court Appeal judgment to the second business interruption test case, due early this year.