Data and analytics company GlobalData says Australia’s insurance industry is poised for decelerated growth over the next five years due to the challenging business environment and coronavirus outbreak.
As a result, the country’s insurance industry is projected to decline by 1.3% from US$80.5 billion in 2019 to US$77.5 billion in 2020.
An analysis of GlobalData’s Global Insurance Database suggests that Australia’s insurance industry is now forecast to grow at a compound annual growth rate of 1.8% during 2019-2024 against the previous estimate of 4.2%.
“Australia’s economic growth is expected to sharply decelerate in 2020 due to the disruption from Covid-19 outbreak,” said Sangharsan Biswas, Insurance Analyst at GlobalData.
“The projected recession will be first for this country in last 30 years and will adversely impact the short-term growth of the country’s insurance industry.”
GlobalData notes that the biggest impact of economic slowdown will be on motor insurance business.
As per industry estimates, due to the fall in consumer spending, vehicle sales are expected to decline by 30% in 2020. This will in-turn impact motor insurance business.
Another segment likely to be most impacted is property insurance. The government ban on property auctions stalled the market.
As part of the lockdown measures initiated for COVID-19, about 40% of real estate auctions were withdrawn.
The resulting slowdown of the property market, which was just recovering from a slump, translates to lower premium growth for the property insurance business.
New property sales will be on hold till the situation stabilizes. This adds to the pressure on the insurance industry’s profitability, which is already facing high claims from recent bushfires.
“Enhanced government spending is expected to moderate the impact of Covid-19 on the economy,” Biswas concludes.
“However, the recovery phase will be a long-drawn one and the insurance business will take time to get back to its pre-Covid growth rates.”
