Australia to see US$15bn growth in general insurance by 2025, report finds
The general insurance (GI) industry in Australia is forecast to grow to US$67 billion in 2025, according to research from data and analytics company GlobalData.
The research projected that gross written premiums (GWP) will increase substantially from A$76.3 billion (US$51.8 billion) in 2020 to A$98 billion (US$66.9 billion) in 2025.
In its insight report, titled ‘ Australia General Insurance: Key Trends and Opportunities to 2025’, GlobalData said that the GI industry in Australia is expected to grow at an annual rate of 5.1 percent over the full years from 2020–2025. This growth will be supported by the gradual economic recovery following the slowdown caused by the COVID-19 pandemic and growing demand for insurance against natural disasters.
Deblina Mitra, insurance analyst at the research firm, said: “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, the government’s fiscal support and faster adoption of innovative business models helped improve the economy with most businesses reopening in September 2020.”
This also had a positive on GI with improvements in investment income and underwriting results helping net earned premiums to grow by 6.1 percent in the third quarter of 2020 (July to September) after a decline of 4.8 percent in the previous quarter.
The report identified motor insurance as the largest general insurance line with a 24.4 percent share of the direct written premium (DWP) in 2020. It reported lower growth of 2.9 percent in 2020 as a result of tighter lending conditions, which are expected to continue in 2021.
But motor insurers are launching innovative products to drive sales, which include pay-as-you-go and short-term car insurance, where premiums are charged based on the actual distance traveled, which is recorded by a telematics device installed in the car. This helps policyholders to save on premium and get customised insurance.
The report found that property insurance, the second largest insurance line with a 21 percent share of DWP, was hit by heavy natural catastrophe losses in 2020. GlobalData cited the Insurance Council of Australia (ICA) as saying that the October-November 2020 hailstorm in Queensland resulted in over 8,500 claims on November 1, 2020, alone. Of this, 40 percent were accounted for by motor claims and the remaining 60 percent by property insurance.
Large losses from wildfires and other catastrophic events have persistently pushed premium prices higher during the last five years, the report said. Catastrophe-linked insurance lines have reported double-digit increment price rises since the fourth quarter of 2017, which is expected to continue in 2021.
Mitra said: “The reopening of several economic sectors will aid demand for general insurance in 2021. Cyber security, mental health wellbeing and domestic travel are expected to be key focus areas for insurers over the next five years. As digitalisation picked up pace in 2020, it also increased exposure to cybercrimes thereby driving demand for cyber insurance.”
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