The Australian Property and Investments Association (APIA) is predicting the industry will be in a recession in 2017.
The report says the collapse in property insurance premiums is largely to do with the “unexpectedly rapid decline” in property value, and the “disappointing” outlook for the economy.
It says that since 2016, property insurers have paid $2.8bn to customers, while the cost of servicing them has risen to $2bn.
It predicts a decline in commercial property insurance coverage by $800m.
Property insurance costs have increased $1.3bn over the past year, according to APIA.
APIA chief executive and chief economist Michael Haggerty says the slump is due to the fall in property prices and a slowing economy.
“The decline in property premiums reflects the fact that many property insurers were unable to cover their clients’ property losses and their customers were unable or unwilling to invest in new property,” Mr HaggerTY said.
“For the second year in a row, commercial property insurers are under pressure, with a total of $1bn being paid out to customers last year.”
Commercial property insurance premium is likely to fall in the first half of next year, the APIA said, citing the Federal Government’s Property Tax relief.
It is expected to fall by an average of 7.3 per cent next year.
“This is largely due to lower demand for commercial property and a slower economy, with property prices expected to rise 2.5 per cent in the coming year, compared to 2015,” Mr Whelan said.
The average cost of commercial property is expected in the year to June 2019 to be $5.1 million, up from $539,000 in 2016.
“While commercial property rates have risen steadily over the last year, this has been driven by a weaker economic environment in Australia and the ongoing global economic downturn,” Mr Latham said.
Property insurers pay out $2,400 to every property insurance claim A number of companies have been affected by the drop in property coverage.
PropertyInsurance.com, which provides commercial property, commercial casualty and commercial insurance, is among those affected by a decline of about 1 per cent.
“It is very much an issue with the insurance industry,” Mr Molloy said.
Mr Mollsoy said the business was not in a “survival mode” as a result of the downturn, and was working with its clients to manage their risks.
“There is a number of ways we can be more proactive, but our clients have to be proactive about managing their own risk,” he said.
APA spokeswoman said it was the case that commercial property premiums have been declining for a number years.
“Over the past 12 months commercial property has experienced the most recent downturn, with average premiums down by over $700 million,” she said.
Ms Latham believes the industry has been caught between a rock and a hard place.
“We have to recognise that we are in a bit of a precarious position,” she told ABC Radio Melbourne.
“Commercial property is in the process of losing a lot of value.”
We’ve got some very, very serious problems for the commercial property sector, for the industry and for the country,” she added.
APPA president and chief executive Andrew Smith said there had been a “significant reduction in the amount of risk being covered by commercial property” in recent years.
Commercial property is a type of insurance that covers property losses, and also property damage, such as damage caused by natural disasters or accidents.
Commercial insurance has become a popular industry with businesses.
“So we’re not sure what the future holds for us.” “
If commercial property were to be left to its own devices, we’d see a major decrease in our industry,” he told ABC radio.
“So we’re not sure what the future holds for us.”
The APIA’s chief economist says the industry faces significant challenges, but that they will be resolved by the government and industry.
“Some of the key challenges are going to be addressing the cost structure for commercial properties, and that is going to take some time,” Mr Smith told ABC News Breakfast.
“And in terms of a lot more people being insured by the private sector and not being covered in commercial insurance.”
Mr Smith says there are some areas where the industry is “firmly in” a downturn.
“But as things are now going on, I think we’re going to see a lot less commercial property than we would have anticipated,” he added.