Australia’s motor insurance market is forecast to contract 4.4% this year due to the coronavirus outbreak, reversing 3.6% growth in the previous 12 months, UK-based analytics group GlobalData says.

Insurance analyst Deblina Mitra says new vehicle sales last month fell 19.2% compared to a year earlier, as the economic impact of COVID-19 came on top of existing market weakness. The impact is resulting in lower premium collections.

The Federal Chamber of Automotive Industries reports new vehicle sales last year fell 7.8% to 1.06 million, the lowest annual number since 2011.

The commercial segment has been particularly hard hit in the pandemic downturn, with month-on-month declines of 46.5% in July compared to June, according to the chamber’s data, while passenger and sports utility vehicle sales fell 28.9%.

“The recent second wave of COVID-19 infections could further derail recovery process for motor insurance industry,” Ms Mitra said. “Although recovery in motor insurance industry is expected to begin from 2021, the growth is expected to be a subdued one.”

Insurers are likely to face further pressure from lower premium collections, with firms such as Allianz and Budget Direct offering up to 15% discounts on new comprehensive policies to boost growth, she says.

Companies are also looking at product innovations to increase sales, including short-term insurance and pay-as-you-go models.

UbiCar, Real and Kogan are offering pay-as-you-go policies based on distances travelled, recorded via telematics devices. Huddle is offering fixed-kilometre pay-as-you-go plans and Poncho is offering up to 30% in premium reductions as lockdown restrictions result in lower car usage, GlobalData says.

Suncorp this week said it is piloting its new comprehensive car insurance brand Bingle Go in three cities, offering month-to-month, cancel any time policies straight from a smartphone app as well as rewards for less frequent car use.

GlobalData forecasts the Australian motor insurance market will register a compound annual growth rate of 1.6% for the five years ending 2024, primarily due to the ongoing economic uncertainty and long-term downturn in the auto sector.