The risk industry is set to achieve strong growth over the next 15 years, according to Rice Warner’s annual Risk Insurance Projections Report.
The report predicts that the total annual premium income for the risk insurance market will reach over $35 billion by 2025, representing an increase of 9.4% pa. This compares with an annual premium income for the industry of just over $9 billion in the year to 30 June 2010
Commenting on the report, Richard Weatherhead, a Director of Rice Warner Actuaries said: “Life insurance continues to be a growth industry, with the size of the market projected to increase by 6.2% per annum in real terms over the next 15 years.
Recent growth across all the broad market segments… has gone some way to alleviating underinsurance
“Recent growth across all the broad market segments of group risk, adviser risk and direct risk insurance has gone some way to alleviating underinsurance, with the average level of death cover across the working age population increasing from 2.9 years average earnings in 2008 to 3.6 years average earnings in 2010.
“However, there is still a long way to go before all Australians are adequately covered,” Mr Weatherhead added.
Rice Warner anticipates that the growth will be driven by a combination of:
- An increase in the take-up of modular or intra-fund advice on life insurance needs
- Further increases in default levels of cover in superannuation funds
- Improvements to application processes, including auto-underwriting
- Increased usage of customer analytics which would facilitate better targeted marketing and distribution opportunities
- Continued competition between existing insurers and new companies entering the market.
According to the report, the average level of death cover provided per head of the working age population is currently $246,000. On average, this represents around 3.6 years earnings, significantly lower than the recommended benchmark of 10 years.
Rice Warner predicts that this average level of death cover will increase to 6.8 years earnings by 2025.
The average level of income protection cover is predicted to grow even more significantly, reaching $2,487 per month in 2025 (up from $1,066 in 2010).
The overall distribution of the risk market is unlikely to change much during the next 15 years, with Rice Warner predicting that 62% of the market will be retail business and 38% wholesale business. This compares with 70% retail and 30% wholesale at 30th June 2010.
