Genworth will lift its premiums on lenders' mortgage insurance by seven per cent in Australia, its US management disclosed last night. The rise will help offset a rise in the severity of claims that triggered a loss of US$21 million in the March 2012 quarter on Genworth's Australian business.The company's US owner devoted most of its quarterly conference call with investors yesterday to a review of the positioning of its Australian business.The quarterly loss may be the first since the firm (or its predecessor, GE Capital) took control of the company in the late 1990s. In 2011, Genworth earned a profit of US$196 million in Australia.The loss ratio in the first quarter of 2012 was 154 per cent. In 2011, the loss ratio was 47 per cent.Borrowers based in the tourist regions of coastal Queensland, and self-employed and small business borrowers feature among those losing all their equity in their homes and obliging their financiers to rely on insurance to minimise lending losses.Loans made in 2007 and 2008 (that is, before the onset of the GFC forced a tightening in underwriting standards) are producing the bulk of recent claims.A presentation published yesterday evening shows that the average claim paid by Genworth jumped to A$104,000 in the month of March, up from an average that ranged from $53,000 to $77,000 in each of the six months before this.Genworth paid 852 claims by lenders for lending losses on home loans during the March quarter, up from 483 claims during the December 2011 quarter.The lift in the number of claims reflects efforts by Genworth to reduce the lag between a loan falling into arrears and that delinquent loan turning into an insurance claim.Jerome Upton, chief operating officer of the international mortgage insurance business, told the conference call that this lag used to be a little longer than 12 months but had lengthened to as long as 24 months.Upton cited lender forbearance and an increase in the number of hardship disputes referred to the Credit Ombudsman Service and to the Financial Ombudsman Service for this trend.He said borrower complaints to these services - a tactic that suspends collections activity - were on the rise.However, the spike in the average size of claims in March surprised local and US management.A speedy but thorough review of troubled loans led to a rise in reserves of US$131 million for the quarter or more than three times the average level for each quarter in 2011.The spike in the loss ratio and the additional reserves led the board of Genworth to defer a planned sale of up to 40 per cent of its Australian operations until next year.Upton said Genworth still expected the Australian business to make a profit in 2012 and would still pay a dividend.