Australia’s motor insurance market is facing an extended period of low growth after an expected 4.4% contraction this year as the coronavirus outbreak exacerbates existing weakness, UK-based analytics group GlobalData says.

Lower vehicle sales will cause premium collections to decline this year, reversing growth of 3.6% in the previous 12 months, according to revised forecasts from the group.

The market is forecast to register a compound annual growth rate of 1.6% for the five years ending 2024, mainly due to ongoing economic uncertainty and a long-term downturn in the auto sector.

“Although recovery in motor insurance industry is expected to begin from 2021, the growth is expected to be a subdued one,” insurance analyst Deblina Mitra says.

The Federal Chamber of Automotive Industries says the commercial segment has been particularly hard hit in the pandemic downturn, with month-on-month declines of 46.5% last month compared to June, while passenger and sports utility vehicle sales fell 28.9%.

Overall new vehicle sales last month were down 19.2% compared to a year earlier.

Ms Mitra says firms such as Allianz and Budget Direct are offering up to 15% discounts on new comprehensive policies to boost growth, while 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 IAG’s Poncho is offering up to 30% in premium reductions as lockdown restrictions result in lower car usage, GlobalData says.

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