Years of solid growth in Australia’s life insurance industry
came to an abrupt halt in 2008 as a number of factors contrived to
send premium inflows plummeting. Amid the gloom, higher demand for
risk cover was an exception, something the industry aims to build
on in an underinsured consumer market.
Australia’s life insurance industry went from feast in 2007, a year
in which premium inflows surged by 37.4 percent, to famine in 2008
as inflows slumped by 28 percent to A$37 billion ($27 billion).
This sharp reversal in fortunes is revealed by data supplied by
Plan For Life (PFL), an independent Australian actuarial and
PFL defines inflow as single premiums received in a reporting
period plus new inforce recurring premiums at the end of the
By and large, Australian life insurers all experienced steep
declines in premium inflows in 2008, with the largest insurer, AMP
Group recording an above-average 31.9 percent fall in inflows to
A$9.9 billion. Its closest rival, National Australia Bank’s
insurance and wealth management unit National Australia/MLC Group,
recorded an even more severe 40.7 percent fall to A$7.95 billion.
Premium inflow of the third-largest player in the industry, ING
Australia Group, declined in line with the industry average to
But despite an overall gloomy picture, there were notable
exceptions with five insurers – Asteron, Axa Australia, CommInsure,
TOWER Group and Allianz Australia Life – achieving positive
Topping the growth stakes was Axa Australia, a unit of Axa Asia
Pacific Holdings, in which French insurer Axa has a 53.1 percent
stake. Trouncing its rivals Axa Australia produced a 23.4 percent
increase in premium inflows to A$2.2 billion in 2008, increasing
its market share from 3.5 percent in 2007 to 6 percent.
Giving Axa Australia the edge was a strong performance in the group
superannuation (super) funds market where it increased premium
inflows by 95.1 percent to A$1.16 billion. The insurer’s
achievement was against the background of a steep decline in
inflows into supers in 2008.
Long the Australian life industry’s major source of premium income,
total super inflows were down 35.8 percent in 2008 at A$21.1
billion with group super inflows suffering the most, falling by
38.6 percent to A$10.3 billion. Individual super inflows fell by 33
percent to A$10.8 billion. Axa Australia, which recorded individual
super inflows of A$356 million limited the decline in the
individual sector to 14.8 percent.
The life industry’s second-largest source of new business,
non-super retirement products, were also under pressure in 2008
with inflows falling 28.9 percent to A$8.2 billion with only one
player, Commonwealth Bank Group’s composite insurance unit
CommInsure, bucking the trend.
In 2008, CommInsure achieved a 3.5 percent increase in inflows to
A$496 million, significantly better than its three larger rivals
AMP Group, which registered a 15 percent decline to A$2.94 billion,
and National Australia/MLC Group and ING Australia which both saw
inflows slide by some 35 percent to A$2 billion and A$1.73 billion,
Notably, PFL does not entirely ascribe the decline in super and
other retirement product inflows to turmoil in global investment
markets. Perhaps more importantly, observed PFL, in the case of
super and retirement income products was a once-off legislation
driven surge in new business in 2007 which has now passed. In
essence, legislation enabled most Australian’s to top-up their
super and other retirement investments by up to A$1 million before
1 July 2007. After that date lower top-up limits came into
Risk products shine
Amid the gloom of Australia’ life market in 2008, the only
highlight was provided by risk products which attracted premium
inflows of A$7.2 billion, up 12 percent compared with 2007. Based
on new sales only, premium income in 2008 increased by 10.7 percent
to A$1.94 billion.
In terms of new sales AIG Life led the way with premium income
surging 89.7 percent to A$158 million, increasing its share of the
new business segment from 4.7 percent in 2007 to 8.1 percent. AIG
Life forms part American International Group’s Asian unit American
Strong growth in the new risk business segment was also recorded by
market leader CommInsure which upped new sales 47.1 percent to
A$306 million and its total market share from 14.1 percent to 14.9
But despite improved risk product inflows Australian’s remain
significantly underinsured warns Australian industry body the
Investment and Financial Services Association (IFSA).
Stressing this point, IFSA deputy CEO John O’Shaughnessy said:
“More than 13,000 families received an average payout of A$91,000
on the death of a partner, usually the primary breadwinner [in
“Given the average family with young children has debts totalling
A$167,000, these levels of cover will not protect the majority of
Australians from financial difficulty following this type of
His comments accompanied the launch on 1 May of Lifewise, a joint
IFSA and insurance industry campaign aimed at increasing public
awareness of the importance of risk cover.
According to a study by the IFSA undertaken in 2007 only 55 percent
of Australian’s have risk-related life insurance.