Life insurance inflows grew by five per cent in the 12 months to the end of June, buoyed by a thriving individual superannuation investment market according to the latest quarterly report into the sector by research group Plan for Life.
Individual superannuation investors poured $16.7 billion into life companies’ statutory funds, a 12.6 per cent jump on the previous 12 months, boosting total inflows into the life insurance market to $39.3 billion for the year.
The growth was underscored by a growing flow of funds into the superannuation sector itself as the compulsory Superannuation Guarantee (SG) rate rose from 7 to 8 per cent from the July 1 last year.
“The superannuation market [for life insurance companies] will continue to grow because of a continuation in the growth of money flowing into superannuation funds,” Plan for Life managing director Simon Solomon says.
The risk insurance market was also a strong performer for life companies, with inflows into the market growing from $2.8 billion as of June 2000 to $3.2 billion as of June 2001, mostly on the back of rises in premiums themselves.
By comparison the ordinary, or non-superannuation, investment business for life companies continued to suffer, with investors abandoning more traditional life company products for other vehicles such as unit trusts, often offered by the same organisation.
The non-superannuation investment business shrunk by almost 14 per cent for the year, with total inflows falling from just under $1.3 billion to about $1.1 billion. The fall came on the back of a 22 per cent drop in the sector over the previous twelve months.
“Some of the life company products are battling to keep pace with unit trusts,” Solomon says.
BT Lifewas the biggest beneficiary of the overall increase in premium inflows, experiencing a 55.8 per cent rise in its business over the 12 months, while other large groups, includingNational Australia/MLCandCommonwealth/Colonialalso experienced strong growth.
At the other end of the scale,INGhad to put up with a 28 per cent drop in its life business as it concentrated on a strategic push away from life products.
Citicorpalso had a tough year, with inflows into its life products falling by almost 26 per cent for the year as it faced stiffer competition in the retirement income stream market from groups likeChallenger International.
Challenger experienced a 40 per cent jump in the volume of funds flowing into its life products over the year, although the growth came from a comparatively low base.
