This article covers:
• Growth in life insurance premiums
• Increase in life insurance claims
• Comparison between premium growth and claims rises
• Financial Services Council reports
• Ernst & Young predictions on premium growth
Premium Growth Analysis
As the life insurance sector enters 2024, a notable trend emerges, painting a complex picture of growth and challenge. The sector, a critical component of the financial services industry, is witnessing a significant uptick in life insurance premiums, with numbers reaching $3.24 billion in the final quarter of 2024. This represents a slight but steady increase from $3.21 billion in the previous quarter, according to the Financial Services Council’s latest quarterly spotlight. Such growth is not isolated but part of a broader trend, with premiums having risen from $2.69 billion in 2019 to $3.16 billion in 2023, marking a 2.5% increase year-over-year.
However, this growth in premiums is accompanied by a parallel increase in claims, challenging the sector’s profitability and sustainability. The number of life insurance covers has remained stable at 4.15 million, yet the total claims accepted have reached their highest point since 2020. This rise in claims, outstripping premium increases, indicates a recovering yet strained sector, attempting to balance between attracting new policyholders and managing escalating claims costs.
Comparing Premium Growth and Claims Rises
While the UK insurance sector reflects a similar pattern of steady but slowing premium growth, predictions by Ernst & Young hint at a broader industry trend. Non-life insurance premiums in the UK are projected to rise by 5.2% in 2025, a slowdown from the 8.4% growth in 2024. This deceleration is expected to continue, with growth rates dipping further to 4.3% in 2026 and 3.6% in 2027. Such projections suggest that while the life insurance sector is not alone in facing growth challenges, the balance between premium income and claim payouts remains a critical issue.
The situation in New Zealand mirrors these complexities, where the increase in claims has notably outpaced premium growth. According to data from the Financial Service Council NZ, life insurance premiums rose to $3.24 billion in 2024 from $3.16 billion in 2023. This 2.5% increase, although modest, is overshadowed by the proportionate rise in claims, underscoring the pressure on life insurers to maintain financial health amidst rising demands.
Implications for the Life Insurance Sector
The tug of war between rising premiums and claims in the life insurance sector underscores a critical juncture for insurers. The ability to sustainably manage this balance will dictate not only individual company success but also the overall health of the insurance market. For insurers, this means innovating in risk assessment, policy pricing, and claims management to stay ahead. For policyholders, it may result in adjusted premiums or benefits as companies strive to maintain equilibrium.
The insights from the Financial Services Council and projections by Ernst & Young serve as a bellwether for the industry, indicating that while growth is present, it is accompanied by significant challenges. The life insurance sector must navigate these complexities with strategic foresight, balancing short-term gains with long-term sustainability. As the industry evolves, the outcomes of this balancing act will be crucial for insurers, policyholders, and the broader financial services ecosystem.
In conclusion, the life insurance sector is experiencing a period of growth tempered by rising claims, a dynamic that requires careful management and strategic innovation. The coming years will reveal how well the industry adapts to these challenges, with implications for the financial stability of insurers and the affordability and quality of coverage for consumers.
