In his most recent Trialogue update, Tria managing partner Andrew Baker said with the super sector becoming increasingly concentrated and faced with increasing outflows to self-managed super funds, inflows are getting harder to come by.
But rather than the insurance sector picking up the slack in super, the retail advised life insurance industry actually faces similar challenges to super, Mr Baker said.
The retail advised segment as a whole was in net outflow in full-year 2012 and this is likely to be worse in 2013, with most retail life insurers seeing negative net flows, he said.
Growth in the sector comes from CPI inflation, increasing premiums as policy holders age and new business sales, while policy lapses reduce the number of policies and amount of premiums, Mr Baker said.
In 2012, CPI growth and age-related increases were able to largely offset negative new business growth due to lapses – but premiums essentially grew due to stepped increases on a largely static policyholder base. The number of insured and average cover held did not grow, according to Tria.
Previously seen growth levels of 8 per cent to 9 per cent, driven by an ageing population, cannot be expected to continue, he said.
The number of policies “are not being added to in net terms: more people in younger demographics have deferred buying property and have preferred to gain insurance via compelling group cover in their collective super funds,” Mr Baker said.
“This would explain: (a) the observed growth in age-based increases over the last [six to seven] years, and (b) the recent growth in lapse rates.”
The fastest growth has been seen outside the advised channels on the back of an expanding range of products, Mr Baker added.
“So where are the growth opportunities? The real opportunity is in areas of genuine underinsurance – notably in developing products relevant to the fast growing, increasingly wealthy older demographics,” he said.
“Those are the types of initiatives which can bring the Australian insurance industry into line with international norms on insurance composition and premiums per head.”
