Life premiums in Oceania contracted by a further 13% in 2016 after falling 7.7% in 2015, says Swiss Re Institute's sigma report, "World Insurance in 2016".
This was due to a 14% contraction in Australia reflecting continued weakness in saving products, as low investment returns have rendered investment-linked and annuity products less attractive.
In terms of profitability, Australian life insurers’ net profit after tax fell sharply, mostly due to lower profits in risk business. Poor claims experience of disability income (DI) products remained the main drag on profits, despite aggressive repricing.
In New Zealand, life premiums growth eased to 3.4% in 2016 (2015: 4.2%). Trauma and income protection-type products reported sound premium growth, but this was partly offset by a decline in sales of whole life, endowment and unbundled traditional products.
Outlook for life sector
Life premiums are expected to register moderate growth in 2017, supported by savings products as yields have improved slightly. In Australia, life insurers are likely to further increase premium rates of DI products, and some have made substantial revisions to their claims assumptions. In the group market, some superannuation funds are tightening up the definition of total and permanent disability.
In New Zealand, trauma and income protection-type products will continue to drive premium growth.
Meanwhile, regulations are increasingly focused on consumer protection. In Australia, the life industry’s first mandatory code of practice has come into full effect since 1 July 2017. The code sets out time frames for insurers to respond to claims, complaints and consumers’ information requests.
Nonlife premiums in Oceania increased by 2.8% in 2016, faster than the 1.5% in 2015.
In Australia, premiums grew by 2.3% (2015: 2.0%), supported by solid business in personal lines, but partially offset by a decline in commercial line premiums. Australian nonlife insurers’ profitability improved in 2016 from lower property claims and large reserve releases in long-tail business, leading to a 27%-increase in sector after-tax net profits to A$2.9 billion (US$2.2 billion). In recent months, some insurers and insurance brokers have turned more positive and are expecting moderate rate increases in commercial lines.
In New Zealand, nonlife insurance premiums are estimated to have grown by 5.1% after a weak 2015 (–1.1%). Nevertheless, the November 2016 Kaikoura earthquake affected results. According to data provided by the Insurance Council of New Zealand, the event-related losses exceeded NZ$900 million (US$622 million). Most of the losses will be absorbed by the reinsurers, which may result in higher reinsurance costs.
Outlook for nonlife sector
Nonlife premium growth is expected to remain low in 2017. The outlook for personal lines is more positive and commercial lines remain soft. Meanwhile, regulators are increasing their focus on technology-driven needs/risks.
In Australia, more states passed ride-sharing legislation. Following legalisation of ride-sharing, the New South Wales authorities are reviewing compulsory third party insurance for point-to-point vehicles, including ride-sharing drivers. New Zealand is also reviewing its transport regulation to allow a cost-sharing rate to facilitate carpooling.
On cyber security, APRA undertook a survey that showed that 75% of the superannuation funds, as well as 46% of the non-life and life insurers, had experienced material cyber incidents in the past 12 months. The Australian Parliament passed an amendment to the privacy law in February 2017 requiring mandatory breach notification. In May 2014, New Zealand announced plans to introduce a two-tier mandatory data breach notification scheme, but this has yet to make it through Parliament.