The latest market snapshot from GlobalData looks at the Life sector;
The Australian life insurance industry is projected to grow at a compound annual growth rate (CAGR) of 5.9% from AUD33.6 billion ($23.3 billion) in 2023 to AUD44.7 billion ($30.4 billion) in 2028, in terms of gross written premiums (GWP), according to GlobalData, a leading data, and analytics company.
According to GlobalData’s Insurance Database, the Australian life insurance industry growth will pick up pace in 2024, supported by macroeconomic and demographic factors such as a stabilizing economy, an aging population, low unemployment rates, and improved investment returns. In the short-term, the industry growth will also be aided by a rise in premium rates due to inflation while long-term growth will be supported by an evolving regulatory landscape.
Sravani Ampabathina, Insurance Analyst at GlobalData, comments: “The Australian economy is recovering from the high inflation faced during 2022-23. The gradually stabilizing economy and increasing insurance awareness will present opportunities for the growth of the life insurance industry over 2024-28.”
Persistent inflation led to the consumer price index (CPI) reaching a high of 7.8% in December 2022, gradually decreasing to 4.9% in October 2023. With increased monetary tightening by the Reserve Bank of Australia (RBA), inflation is expected to reach the targeted 2-3% in 2024, which will provide an impetus for higher consumer spending on life insurance.
Ampabathina adds: “Low unemployment rate and steady investment income are the other macroeconomic factors that will aid life insurance growth over 2024-28.”
According to GlobalData’s Macroeconomic Database, the unemployment rate is expected to be steady at 4% during the next five years, which will help sustain consumer spending on insurance. Additionally, higher interest rates have significantly boosted insurers’ capital position which will support in balancing a sharp rise in premiums arising due to the increasing cost of claims. According to the Australian Prudential Regulation Authority (APRA), the life insurance industry doubled its profits to AUD1.2 billion ($831.1 million) in the year ending June 30, 2023.
In terms of demographic factors, Australia has an aging population which will support the demand for life insurance. According to GlobalData’s Macroeconomic Database, the percentage of people aged over 65 years is expected to increase from 16.7% in 2023 to 18.6% in 2030.
In addition to the aging population, the post-COVID-19 pandemic increase in healthcare awareness has led to a rise in the membership of private health insurance. As per the Private Healthcare Australia (PHA), membership for private health insurance grew by 2.3% in 2023 and around 55% of the Australian population has private health insurance.
Ampabathina continues: “Australian regulators have introduced multiple reforms in 2023 to bring the life insurance practices in line with international standards. This is expected to improve transparency and boost customer satisfaction and positively impact the life insurance industry over the coming years.”
The Australian Accounting Standards Board 17 (AASB 17) and the Life Insurance Code of Practice (Life Code) were introduced on 1 July 2023. AASB 17 is the equivalent of the International Financial Reporting Standards (IFRS)17 and ensures consistency in insurance contracts and facilitates meaningful comparisons between policies and companies. AASB 17 prevents fraud and manipulation and aims to increase customer trust by providing an accurate picture of the company’s financial position.
The Life Code mandates plain language in life insurance contracts, excluding medical or technical terms. It governs customer relationships with insurers, including claim expectations, claim determination timelines, and complaint mechanisms.
Ampabathina concludes: “Growing awareness of life and health insurance, decline in inflation, and steady premium pricing will support Australia’s life insurance growth over 2024-28. The regulatory reforms will further streamline the industry, paving the way for consistent long-term growth.”
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