The CEO of a major insurance broker network, Robert Kelly, stated that the recent surge in insurance premiums across Australia was not driven by inflation but rather by the increase in insurance claims. During an inquiry hearing on Oct. 9, members of a Senate Committee questioned Kelly about the rise in insurance unaffordability since 2019, which exceeded inflation growth. Kelly explained that the rise in insurance costs since 2011 was primarily due to the impact of claims on insurance companies. He emphasized that insurance prices are determined by the losses incurred by the company for the specific class of risk in the geographical area they operate in, rather than inflation. Kelly also highlighted the significant increase in reinsurance costs over the past three years, which contributed to the spike in insurance premiums. He dismissed the idea of using inflation as a basis for raising premiums, emphasizing that the cost of insurance is driven by losses and the need to support capital for claim settlements. The article also mentions data from the Insurance Council of Australia, forecasting a 5 percent annual increase in the cost of extreme weather events, reaching $35 billion annually by 2050. Additionally, Actuaries Institute CEO Elayne Grace revealed that 15 percent of Australian households were facing extreme insurance affordability pressure as of March 2024. Kelly addressed the issue of high commissions charged by brokers for strata insurance policies, agreeing that a 40 percent increase in premiums was excessive. He disagreed with the proposal to set a fixed 10 percent commission rate for insurance premiums, stating that the current 20 percent commission had remained unchanged for two decades. Kelly also noted that a 10 percent commission rate may not be realistic in certain cases, such as in North Queensland, where obtaining insurance policies is challenging due to frequent natural disasters.
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