Australia Insurance Market Forcast: $73.6 bn premium in 2026

GlobalData has projected that the value of the general insurance industry in Australia could rise to around US$73.6 billion in 2026.

This represents a compound annual growth rate (CAGR) of 6.4 per cent over the next five years in terms of direct written premiums (DWP), rising from around A$73.29 billion in 2021.

The Australia general insurance market size was $61.2 billion in 2022. The market is expected to grow at a CAGR of more than 6% during the forecast period.

The Australian general insurance premium growth was aided by the double-digit growth in commercial property and professional indemnity GWP and growing demand for natural catastrophic policies.

The Australia general insurance market research report provides a detailed outlook by product category for Australia’s general insurance segment. It provides values for key performance indicators such as gross written premium, net written premium, loss ratio, premium by line of business, and loss ratio, during the review period and forecast period.

The report also analyzes distribution channels operating in the segment and gives a comprehensive overview of Australia’s economy and demographics. Moreover, it provides detailed information on the competitive landscape in the country and includes details of insurance regulations and recent changes in the regulatory structure.

The increase is expected to be driven by a strong post-pandemic economic recovery.

The Australian economy is expected to grow by 3.8 per cent in 2021 as compared to a decline of 2.5 per cent in 2020. In line with the economic growth, the general insurance industry in Australia grew by 6.7 per cent in 2021 as compared to the four per cent growth in 2020.

Other driving factors for growth in the sector, which is dominated by personal accident and health, motor and property insurance, include increased vehicle sales and growing demand for policies covering natural catastrophes.

Growth will be led by personal accident and health, motor, and property insurance

Australia’s insurance sector is led by personal accident and health (PAH) insurance, which constituted over a third (36.7 per cent) of DWP in 2021. PAH insurance is expected to grow at a CAGR of 4.5 per cent between 2021 and 2026, with the segment growing by 0.7 per cent in 2021, following a decline of 0.2 per cent in 2020.

PAH insurance was supported by increased premium rates by the government amidst rising medical costs, and policies in this sector are predominantly sold as riders or additional insurance for services not covered by the public health sector.

Motor insurance, which accounted for 24.2 per cent of general insurance DWP in 2021, grew by six per cent in 2021, backed by a 14.5 per cent rise in vehicle sales. The segment is expected to grow at a CAGR of 6.4 per cent between 2021 and 2026.

Property insurance, the third largest segment with a 22.3 per cent share in 2021, is also projected to grow at a CAGR of 7.2 per cent between 2021 and 2026, due to increasing numbers of natural calamities in 2021 across Australia. The sector grew by 9.5 per cent in 2021.

Australian general insurance industry is expected to maintain its positive growth momentum over the next five years driven by strong economic recovery. The profitability of insurers, however, will remain clouded due to escalating losses from increased frequency of natural calamities and rising medical costs.

The Australian Securities and Investments Commission issued a consultation paper regarding the modification of class order on Product Disclosure Statement (PDS) requirements for general insurance products in November 2021.

Following the end of consultation in December 2021, it issued PDS requirements which facilitate insurance quotes being given to consumers over the phone, enabling consumers to shop around and compare general insurance products for five years.

In line with the development, AAI introduced a digital tool to assist home and contents insurance customers with better insurance quotes in 2022.

With unsustainable losses from climatic damages, demand for parametric insurance is expected to become more widespread. In November 2021, a new parametric cyclone insurance product, Redicova, was launched in Northern Australia by Lloyd’s Disaster Risk facility (DRF).

The product aims to provide payouts by utilizing track maps (a method that plots the journey of cyclones through real-time data) and data from the Australian Bureau of Meteorology to assist Northern Australian businesses to reduce the impact of severe cyclones.

What are the key lines of business in the Australia general insurance market?

The key lines of business in the Australia general insurance market are non-life PA&H insurance, motor insurance, property insurance, liability insurance, miscellaneous insurance, financial lines insurance, and MAT insurance. Non-life PA&H insurance has the highest share in the market followed by motor insurance and property insurance.

Non-life PA&H insurance market in Australia

PA&H insurance was partially impacted by slow growth in health insurance. Following the outbreak, policyholders started canceling their private health insurance (PHI) policies, as pandemic restrictions forced the cancellation of services that were charged under the health fund and which people could no longer use.

Motor insurance market in Australia

Insurtech-led product innovations are being tried for some traction in the market. These include short-term car insurance and pay-as-you-go (PAYG) models.

Property insurance market in Australia

Earthquakes, floods, and wildfires are major drivers for property insurance in Australia. High losses from wildfires and other catastrophe-linked insurance lines led to double-digit growth in premium prices since Q4 2017, a trend that is expected to continue in 2022.

Which are the leading companies in the Australia general insurance market?

The leading companies in the Australia general insurance market are AAI Ltd, Insurance Australia Ltd, QBE Insurance (Australia) Ltd, Allianz Australia Insurance Ltd, Insurance Manufacturers of Australia Pty Ltd, The Hollard Insurance Company Pty Ltd, Chubb Insurance Australia Ltd, Auto & General Insurance Company Ltd (Australia), RACQ Insurance Ltd, and Zurich Australian Insurance Ltd. AAI Ltd was the leading insurer in 2021.

by Yana Keller