Insurance customers are increasingly choosing lower premiums with the risk of paying higher excesses as they rein in expenses.
A growing number of small and medium-size enterprises are selecting products with lower premiums, IAG Group CEO Mike Wilkins told the Sydney Morning Herald.
“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,” Wilkins said.
He added while households were also cutting down their premiums the trend was “much more pronounced” in the commercial sector.
“People are just very conscious of their expenses and I know for some businesses it’s tough,'' Wilkins said. “So what they're doing is they're saying, 'Look, I'm prepared to trade some of this off'.”
The trend has emerged as the three big ASX-listed insurers – QBE, IAG and Suncorp – indicated softer rates of domestic growth in revenue from premiums in the coming year.
The report said market analysts are debating if the sector has reached its peak rate of profitability after continued growth or premiums in recent years.
Home cover rates have consistently risen by more than 10% for several consecutive years, but with a softening economy analysts say insurers are now being forced to slow rate rises. Growing competition from recent entrants – Coles and Woolworths – is also dampening down any potential rises.
It comes after IAG reported a tripling in profits to $776 million, while Suncorp's general insurance arm said their earnings jumped 79 per cent to $883 million.