The Australian motor insurance market is forecast to contract by 4.4% in 2020 due to COVID-19, a sharp decline from 3.6% growth in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised its forecast for Australia motor insurance market in the aftermath of the COVID-19 outbreak. As per the latest data, the motor insurance business is expected to register a compound annual growth rate (CAGR) of 1.6% over FY 2019–2024, primarily due to the ongoing economic uncertainty and long-term downturn in the auto sector.
Deblina Mitra, Insurance Analyst at GlobalData, comments: “Automobile sales in Australia declined by 7.8% during 2018–2019 due to tighter lending conditions and lower consumer spending. New vehicle sales in July 2020 declined by 19.2% year-on-year due to the economic impact of COVID-19. These resulted in lower premium collections for motor Insurers.”
This impact will be more severe in the commercial segment. As per the Federal Chamber of Automotive Industries, the commercial vehicle sales declined by 46.5% in July 2020 as compared to June 2020. The decline was relatively lower at 28.9% for passenger and sports utility vehicles.
Ms Mitra explains: “Motor insurers are thereby expected to face further pressure. To drive premium growth, insurers such as Allianz and Budget Direct are offering up to 15% discount on comprehensive motor insurance for new online policies.”
Companies are also looking at product innovations to increase sales. Short-term car insurance and pay-as-you-go models are being adopted by companies to increase sales.
UbiCar, Real and Kogan are offering pay-as-you-go insurance policy, where premiums are charged based on actual distance traveled, which is recorded via telematics device installed in the car. Huddle is offering fixed-kilometre pay-as-you-go plans for comprehensive motor insurance. Further Poncho is offering up to 30% in premium reduction due to lockdown restrictions which resulted in lower usage of car.
Ms Mitra concludes: “The recent second wave of COVID-19 infections could further derail recovery process for motor insurance industry. Although, recovery in motor insurance industry is expected to begin from 2021, the growth is expected to be a subdued one.”