There’s life yet for insurers
Australia’s life insurers have an opportunity to grow thanks to the population becoming relatively underinsured, but regulatory and competitive challenges stand before them according to a report on the industry.
Moody’s Investors Service’s ‘Australian Life Insurance Industry Outlook’ says the likes of AMP, National/MLC and CBA/Colonial need to “clearly identify their positions along Australia’s wealth management value chain”.
It says they should tout their holistic investment and insurance capabilities as a way of differentiating themselves from the smaller, non-life competitors who have chipped away at their margins in the super and investment businesses.
Moody’s identifies a major growth opportunity for the insurance business alone.
“The aging population factor will contribute towards growth prospects for risk insurance, as [previously underinsured] Australians become more aware of the need to protect their financial security, especially given their growing exposure to the property market and increasing household debt.
Although this market is relatively smaller than those for superannuation and funds management, it provides an alternative source of earnings for life insurers and is not expected to see the pricing pressures evident in wealth management,” the report says.
However, the traditional life insurers must overcome two major hurdles, the report says. The first is their rump of legacy products, which are operationally expensive, and the second is the loss of transitional tax relief for savings products sold through life company structures, as opposed to unit trusts, which will impact from July 1 this year.
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The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
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