Companies cut back on insurance
More insurance customers are choosing to pay lower premiums and risk incurring a higher excess if they make a claim, in a sign of expenses being reined in amid the weak economic environment.
The trend, identified by Insurance Australia Group, comes as the sector faces a tougher growth environment after enjoying bumper profits last financial year.
In a sign of softening economic conditions, IAG chief executive Mike Wilkins said a growing number of customers - mostly small and medium-size enterprises - were opting for products that came with a lower premium.
"What we are seeing, particularly in the SME space, is people having a good look at their insurance protections and making conscious trade-off decisions, including taking some higher excesses, because that translates to lower premiums," Mr Wilkins said.
There had also been an increase in the number of households - the largest market for IAG and Suncorp - choosing to cut premiums, though the trend was "much more pronounced" in the commercial sector, he said.
"People are just very conscious of their expenses and I know for some businesses it's tough," Mr Wilkins said.
"So what they're doing is they're saying, 'Look, I'm prepared to trade some of this off'."
The three big ASX-listed insurers - QBE, IAG and Suncorp - last week signalled softer rates of domestic growth in revenue from premiums in the year to come.
While IAG and Suncorp flagged more premium growth after paying out sharply higher dividends, market analysts are debating whether the sector is reaching its peak rate of profitability after a surge in premiums in recent years.
Home cover rates in particular have risen by more than 10 per cent for several years in a row and analysts say insurers are being forced to slow rate rises in a softening economy, in which there is also growing competition from recent entrants Coles and Woolworths.
After Mr Wilkins said IAG would aim to push through premium increases in the low double digits, UBS analyst James Coghill said IAG's commentary was the most conservative in a number of years, and the sector now faced a "much tougher growth phase".
It comes after IAG last week reported a tripling in profits to $776 million, while Suncorp's general insurance arm said earnings jumped 79 per cent to $883 million.