The life insurance sector will continue to grow despite gloomy forecasts for the global economy, according to Financial Services Council (FSC) CEO John Brogden.
“Given the state of equity markets and the all too frequently reported negative global outlook, it is not surprising that life insurance has experienced what many describe as a ‘golden age’,” he told a joint FSC Deloitte Leadership event in Sydney last week.
“The counter-cyclical nature of insurance has without doubt provided an important support to the wider industry given declining revenues in other areas.”
Mr Brogden says the life insurance industry recorded strong growth last year, with premium inflows up 11.5% for the year ending September 2011.
“While these are the metrics that matter to the industry, we cannot forget the key metric that matters to consumers,” he said.
“The latest figures from the Australian Prudential Regulation Authority show in the year to June 2011, the life insurance industry paid out almost $4.7 billion in death and disability claims.
“This amounts to $12.8 million being paid out every single day.”
But the outlook for life insurance is not without problems, and Mr Brogden singled out the Future of Financial Advice (FOFA) reforms, which he says will push up costs if they are not amended.
“Both the FOFA and Stronger Super reforms will impact on life insurance to varying degrees,” he said.
“If unamended, the reforms will generate greater complexity and increase the cost of life insurance.
“We remain hopeful that the Government will simplify its complex proposals in this area to ensure consistency in how consumers pay for advice – irrespective of whether they purchase a policy using superannuation monies or non-superannuation monies.”
Other changes for the industry this year will include further growth in direct distribution and group life insurance.
Mr Brogden says regulatory changes for other distribution channels means direct distribution will grow with more competition during the year.
The group market will also become more competitive, with the proposed MySuper regulations forcing fund trustees to develop an insurance strategy to address the needs of their members.
Mr Brogden says as levels of cover continue to grow in the group insurance market, this will bring benefits for insurers working in the segment.