While life insurance revenue is growing, new data obtained exclusively by insuranceNEWS.com.au shows the market’s policy count has remained static for the past eight years.

Figures obtained from the Australian Prudential Regulation Authority show in 2008 there were 9.3 million policies, and until last year the figure barely changed (see table below).

Last year the number broke the 10 million barrier for the first time.

insuranceNEWS.com.au concentrated on policy numbers rather than premium, because price increases and inflation put the latter on an automatic growth cycle.

ClearView MD Simon Swanson told insuranceNEWS.com.au the policy figures reflect slow growth in the Australian population.

“The population isn’t growing that much and incomes have been flat since 2008,” he said.

“I think this shows the Australian life industry isn’t going anywhere, but I see that as an opportunity.”

Mr Swanson says premium is growing, so the industry does not face sustainability issues.

“The real problem is, not enough Australians are taking up life insurance.

“So the fact the pie isn’t growing is an opportunity rather than a negative. We have got to find those customers.”

The figures also confirm that many new business sales are policies moving from one insurer to another. This is not always a bad thing, because products change and advisers are legally required to switch policies if it’s in a client’s best interest.

Of course, some may be moved for the high upfront commission, but the data does not show reasons for moving policies.

insuranceNEWS.com.au has been told replacement policies account for about 40% of life insurers’ new business. The data seems to confirm a lack of growth in the industry.

Growth may be slowed further when the long-awaited Life Insurance Framework legislation is finally passed by the new Government. It has been suggested restrictions on moving policies, through clawback clauses, could dramatically affect new sales.

Ernst & Young Oceania Insurance Leader Grant Peters says reforms to the life insurance industry will be significant.

“It will change the way life insurance is sold, but there is uncertainty in the long term,” he said. “We don’t know what the Australian Securities and Investments Commission will do after it reviews the impact of the legislation.”

Mr Peters says if the hurdles for life insurance advisers are set too high, there could be a movement away from the industry.

“We could also see adviser groups focusing just on the high end of the market, meaning less adviser sales,” he said. “This could mean the direct life insurance market becomes the winner.”

It is clear the life insurance industry must find a way to insure more people, rather than focusing solely on revenue growth. The figures show less than half the population have some form of life insurance, yet there is no generic attempt to sell the merits of cover.

Recent mainstream media coverage has focused on insurers not paying claims, yet little has been done by the industry to say it pays most claims.

In fact, recent figures from Munich Re show in disability cover the industry has probably been too generous in settling claims, yet life insurers are seen as cruel, heartless organisations out to crush poor claimants.

Perhaps in seeing these policy figures for the first time, the life industry will seriously tackle the underinsurance problem.  

– John Wilkinson

Life insurance policy count 2008-15

Ordinary business*

* Includes individual lump sum, disability income, group life and annuities

Source: APRA