Australia’s major life insurers can be expected to further embrace technology and perhaps partner with big platform players such as Google and Amazon as they look to move beyond old world local market constraints, according to new research from KPMG.
The latest KPMG Life Insurance Insights Report has portrayed an industry that is growing steadily with gross policy revenue increasing by 6.6 per cent to $24.7 billion, which equates to around 1.4 per cent of Australian gross domestic product.
It said the industry generated $14.8 billion of benefit payments for policyholders and superannuation fund members and $2.2 billion in profits for shareholders in the 12 months to the end of March.
However, it also confirmed the growing role of reinsurers in the market, with the level of reinsurance increasing from 23 per cent to 30 per cent over the past five years.
The KPMG report said that merger and acquisition activity had continued to see a shift in ownership from local financial services conglomerates to global life insurance specialists, which were looking to diversify their global business models and were attracted to the strong growth dynamics of the risk market in a mature regulatory setting.
Commenting on the research, KPMG partner, Actuarial and Financial Risk, Hoa Bui said the performance of the insurers had been solid and that they were positioned for the tougher era to come.
“Sustainable growth going forward will only be achieved through customer-centric business models, given the public trust debate across the financial services sector that has been amplified through the Royal Commission,” he said.
“We can expect increased regulatory pressure for life insurers to demonstrate that their products demonstrate true customer value and a transparent customer experience through the full-service life cycle. Compliance and remediation costs will increase in the shorter term, and companies will be expected to adapt their compliance operating models to manage costs effectively.”