Professional Indemnity revenue reduces in 2009

INSURERS received less revenue from professional indemnity cover in 2009. All other sectors of the Insurance Industry actually rose!

The decrease from $1.496 billion to $1.335 billion was provided by the Australian Prudential Regulation Authority May 2010. APRA figures include Directors & Officers Liability as well as Medical Defence cover so it makes it harder to pin point where the reductions are occurring.

One theory that has often been pointed out in this forum is that the number of players, particularly from Underwriting agents has become highly competitive as overseas entrants undercut prices off the back of a very competitive Lloyds market.

Another theory was global financial crisis-related. Some institutions that took insurance in previous years had collapsed, other companies reduced spending on insurance, while 2009 featured a lack of new companies, such as boutique fund managers, which would traditionally seek cover.

Insurers have also reduced their appetite for some activities, such as financial planners, valuers and geotechnical engineering.
For the other sectors, APRA’s figures showed insurer revenue from householders lifted from $4.22 billion to $4.624 billion. Motor insurance also lifted from $7.2 billion to $7.9 billion.

Overall Insurers, posted a $1.9 billion profit after a $21 million loss a year earlier after claims and underwriting expenses are allowed for. These results exclude the income derived from insurers’ investments. 2010 is likely to produce similar results but can it be sustained in 2011? It will depend on what natural disasters also occur in the world as reinsurance rates also play a part.