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Insurance industry in Australia - statistics & facts

The global insurance industry has been undoubtedly impacted by the coronavirus (COVID-19) pandemic. Insurers have had to respond swiftly to unprecedented loss of life, economic uncertainty, and widespread travel disruptions. The forecasted losses from COVID-19 for the insurance industry worldwide were in the hundreds of billions of dollars. A contraction in the value of the global insurance market  was expected in 2020, however, as insurers move to adapt to the requirements of their customers and take advantage of new opportunities, the market is expected to recover and grow. In Australia, the three main segments of the insurance industry are general insurance, life insurance, and health insurance. All three areas have been affected in some way by the fallout from the COVID-19 crisis. Currently, the most common types of insurances held in Australia are car insurance, private health insurance, and home (building) insurance.

Challenges faced by the general insurance industry

In the general insurance segment, motor vehicle and household insurance make up the largest shares, respectively. All registered cars are legally required to have Compulsory Third Party (CTP) insurance in Australia. Additionally, many car owners take out comprehensive car insurance to reduce out-of-pocket expenses if they are involved in an accident. The gross loss ratio of CTP motor vehicle insurance increased significantly in 2020, largely due to a decline in gross written premiums. Extended lockdown periods also led to many people having to work from home in Australia. Insurers have had to react retrospectively in many cases, as household insurance policies do not usually cover working from home.

Life and health insurance

Before the onset of the COVID-19 pandemic, total life insurance funds under management had been trending downwards. Risk products make up the largest share of net life insurance premiums. However, the profitability of risk products has decreased in recent years, with a net loss reported in 2020. There has been an overall increase in the value of claims of insurance risk products in Australia over the past five years. Private health insurance has become less attractive in Australia due to rising premiums. The share of the population with private health insurance hospital treatment coverage has declined overall in the past decade. An aging population, increased use of healthcare services, and associated increasing costs have led to higher premiums that people seem unwilling to pay. The average expenditure by private health insurance providers per person covered has increased by hundreds of dollars over the past decade.

Catastrophe insurance on the rise

Aside from changes in insurance trends relating to COVID-19, catastrophe insurance is becoming more relevant. Insurance losses from major weather events, such as bushfires, storms, and floods, have already led to an increase in claims in recent years. This negative impact on general insurers’ underwriting margins and earnings will likely continue as natural disasters become more commonplace in the country. Policyholders may expect to pay higher premiums as insurers try to compensate for these losses and secure their financial performance for the future.

Key insights

Financial and insurance services industry gross value added
156 bn AUD
Value of general insurance funds under management
47.9bn AUD
Leading insurance segment
General insurance

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