Australia Insurance Report Q2 2016
BMI View: As of early 2016, the general trends for Australia's insurance sector are positive. Thanks mainlyto net immigration, the population is growing. This will contribute to continued growth in overall economicactivity through the forecast period, even if the pace of expansion is slower than in recent years. The lifesegment should benefit from the further development of superannuation funds, from innovation by lifeinsurers, and from increased demand for annuities and other retirement income solutions. The non-lifesegment should benefit from volume growth - although players in many sub-sectors will continue to facedownwards pressure on prices. The main exception to this is the health insurance sub-sector, where insurerswill benefit from rising volumes and, thanks to inflation in healthcare costs, rates.
Key Updates And Forecasts
The growth of the non-life segment continues to be underpinned by the expansion of private healthinsurance. Demand for health insurance is being boosted by tax incentives, the growth of the populationand the ageing of the population. We have broadly maintained our forecasts from last quarter.
For now we are maintaining our view that life premiums will rise by around 2% annually through theforecast period. However, the latest data published (in relation to the year to September 2015) byregulator APRA indicate that the risks to our forecasts are to the upside. We believe that premiums havebeen boosted in the recent past because of the attractiveness of life insurers' offerings relative to otherinvestment opportunities. The local stock market has been volatile. Cash rates are low. Investment realestate is, or is perceived to be, expensive by many yardsticks.
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