Taylor Fry look beyond the headline numbers to assess where the current inflationary pressures are being felt most, the outlook for FY24 and what insurers can do to thrive over the next few years.

Our analysis shows we’re past the inflationary peak for most sectors, but inflation continues to remain above long-term average levels and will increase claims cost pressures for insurers.

Indeed, in its recent report on the Australian economy, the International Monetary Fund said headline inflation’s “decline is slow and core inflation remains sticky”. At a minimum, insurers will need to have a deep understanding of the drivers of inflation for each loss type and the flow-on impact on claims costs and premiums.

Construction, motor parts and travel are key drivers of claims cost inflation for property, motor and travel insurers. We summarise the Australian Bureau of Statistics quarterly inflation figures for the three areas to help us capture the impacts on insurers.

Key driver 1 – Construction

Over the two years to 30 June 2023, construction costs have increased by 20%. Cost pressures have been driven by an increase in demand for materials combined with supply constraints and increases in energy and freight costs. The good news is that the past two quarters show construction cost increases are slowing.

Premium

You need to login to access this

Login

What are CIP Points? About ANZIIF Membership