In Australia, the three main segments of the insurance industry are general insurance, life insurance, and health insurance, and 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 and contents insurance.
Challenges faced by the general insurance industryIn 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 have 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 insuranceBefore 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 a steady 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 for. The average expenditure by private health insurance providers per person covered has seen a consistent increase over the past decade.