Australia’s insurance industry is poised for a decelerated growth over the next five years due to the challenging business environment and coronavirus (Covid-19) outbreak. As a result, the country’s insurance industry is projected to decline by 1.3% from AUD115.7bn (US$80.5bn) in 2019 to AUD114.1bn (US$77.5bn) in 2020, according to GlobalData, a leading data and analytics company.
An analysis of GlobalData’s Global Insurance Database reveals that Australia’s insurance industry is now forecast to grow at a compound annual growth rate (CAGR) of 1.8% during 2019-2024 against the previous estimate of 4.2%.
Sangharsan Biswas, Insurance Analyst at GlobalData, comments: “Australia’s economic growth is expected to sharply decelerate in 2020 due to the disruption from Covid-19 outbreak. 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.”
The impact of economic slowdown will be most 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 As part of the lockdown measures initiated for Covid-19, about 40% of real estate auctions were withdrawn.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.
Biswas concludes: “Enhanced government spending is expected to moderate the impact of Covid-19 on the economy. 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.”
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