Risk Product Profitability Continues to Decline


Profitability of risk products has substantially declined in recent years, largely due to continuing losses in individual disability income insurance (IDII) and further declines in the profitability of individual lump sum and group business, a report from APRA says.

The authority’s 2020 Year in Review, which includes a dedicated section on the life insurance industry landscape, says the net profit margin for 2019/20 was negative 10 percent, considerably below the longer-term average of around three percent.

“This result was driven largely by continued substantial losses in IDII and further declines in the profitability of individual lump sum and group business,” APRA states.

The report says that despite incremental premium rate increases in IDII in recent years, the combined effects of persistent adverse claims experience and the need to strengthen reserves contributed to the poor result.

It adds that the profitability of group lump sum and group disability income insurance also declined during 2019/20.

“However, it should be noted that on an insurer-by-insurer level (as opposed to an industry aggregate level), profitability can be lumpy, with downward movements driven by the timing of insurers changing their assumptions about risk and the pricing of policies.

Credit: APRA.

The report also noted that the top five life insurers accounted for 62 percent of total industry assets, down significantly from 77 percent in the previous year.

“This was due to several insurers decoupling their life insurance operations from their investment-linked business, with a view to making their life units more attractive to potential buyers.”

APRA says the report provides its view on the financial environment and details its key activities for the year across the banking, insurance and superannuation industries, conducted in alignment with the strategic objectives outlined in its corporate plan. It also contains metrics for APRA-regulated industries, including analysis of industry composition, profitability and financial strength.

Click here to see the full report.


  1. The problem when people assume, is they can make an ASS out of U and ME.

    A main reason for the decline in profitability, is the correlation of the brave new world called LIF and it’s implementation, which has led to a dramatic decline in advisers writing new business.

    If done correctly, there is room for 30,000 risk advisers and an increase of New Business revenue is the normal way Businesses grow and meet their continuing expenses.

    It seems the Life Insurers and the Government forgot this basic Business principle.

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