Despite fewer natural disasters in recent times, insurance premiums are expected to remain under pressure due to higher reinsurance costs and lower returns from fixed interest investments.
The KPMG 2012 General Insurance survey found Australia's insurers achieved profit of $2.51 billion in 2011/12, down 18.5 per cent from $3.08 billion in the prior year.
This was despite some significant increases in premiums for households over the past year.
KPMG insurance partner Ian Moyser says the result reflected the impact of severe weather event losses, increased reinsurance costs and lower interest rates.
"This confluence of factors has limited some of the benefit of premium increases," Mr Moyser said.
"Overall, the local general insurance market has consolidated its position well this year, following on from some of the challenges that we had in 2011 in terms of those really severe natural catastrophes."
Mr Moyser said recent interest rate cuts and the expectation of low rates for the period ahead could result in lower yields on insurers' fixed interest securities.
Moreover, Australia's insurers also faced potentially increased costs for reinsurance.
Asked what this would mean for the cost of premiums, Mr Moyser said it insurers' would continue to focus on pricing for the risk that was being underwritten, as well as factor in the cost of reinsurance.
"I think some of the insurers have flagged that they will continue to look at pricing, to ensure they are pricing for the appropriate risk and reinsurance," Mr Moyser said.
"I really couldn't comment on individual insurers' position.
"It is difficult to say, there is an overall position from that perspective because it really depends on an individual insurers' starting point."
Gross written premium (GWP), a benchmark measure of insurance businesses, rose 8.3 per cent to $28.6 billion in 2012, KPMG said.
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