The general insurance industry in Australia is projected to grow from AUD76.3bn (US$51.8bn) in 2020 to AUD98.0bn (US$66.9bn) in 2025, in terms of gross written premiums (GWP), according to GlobalData, a leading data and analytics company.
GlobalData’s insight report, ‘Australia General Insurance: Key Trends and Opportunities to 2025’, reveals that the general insurance industry in Australia is expected to grow at a compound annual growth rate (CAGR) of 5.1% over FY 2020–2025, supported by the gradual economic recovery following the slowdown due to the COVID-19 pandemic and growing demand for insurance against natural disasters.
Deblina Mitra, Insurance Analyst at GlobalData, comments: “The lockdown restrictions due to the COVID-19 pandemic and extreme bushfires affected Australia’s economic growth in the first half of 2020. Effective management of the outbreak, government’s fiscal support and faster adoption of innovative business models helped improve economy with most businesses reopening in September 2020.”
This also reflected positively on general insurance business. Improvements in investment income and underwriting results helped net earned premiums to grow by 6.1% in July-September quarter, after a decline of 4.8% in the previous quarter.
Motor insurance is the largest general insurance line with 24.4% share of the direct written premium (DWP) in 2020. It reported lower growth of 2.9% in 2020 due to tighter lending conditions, which are expected to continue in 2021.
Motor insurers are launching innovative products to drive sales. Some of these include Pay-as-you-go and Short-term car insurance, where premiums are charged based on actual distance travelled, recorded via telematics device installed in the car. This helps policyholders to save on premium and get customized insurance.
Property insurance, the second largest insurance line with 21% share of the DWP, was marked by heavy natural catastrophe losses in 2020. According to Insurance Council of Australia (ICA), the October-November 2020 hailstorm in Queensland resulted in over 8,500 claims on 1 November 2020 alone. Of this, 40% were accounted for by motor claims and the remaining 60% by property insurance.
High losses from wildfires and other catastrophic events have persistently pushed premium prices higher during the last five years. Catastrophe-linked insurance lines reported double-digit increment in prices since Q4 2017, which is expected to continue in 2021.
Ms. Mitra concludes: “The reopening of several economic sectors will aid demand for general insurance in 2021. Cyber-security, mental health well-being and domestic travel are expected to be key focus areas for insurers over the next five years. As digitalization picked up pace in 2020, it also increased exposure to cybercrimes thereby driving demand for cyberinsurance.”