BMI's Executive Summary

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Since the deregulation of Australia's financial services sector began in late 1983 two themes have been constant. The first is that the authorities, specifically the Australian Prudential Regulatory Authority (APRA), the government and, for banks, the Reserve Bank of Australia have encouraged participation by foreign companies. The over-riding philosophy has been that the customers – and possibly the market participants themselves – will benefit from the competition.

The second theme is that, for any financial services institution that is involved with the distribution of, or management of the investments held by, organised savings vehicles, there has been a large and growing pool of assets for which to compete. That pool of assets consists of Australia's superannuation funds (essentially private pension plans). As of mid-2007, the superannuation funds held assets of AUD1,153bn (US$1,000bn): coincidentally, this is approximately the same as Australia's annual GDP. Over the previous 12 months, the funds had expanded by 25% in Australian dollar terms. This was partly because of the performance of global financial markets and partly because of contributions. All Australian employers make a compulsory Superannuation Guarantee (SG) Levy payment to their workers' superannuation funds. Currently the SG Levy is 9% of income.

For the insurance sector as a whole, the effect of the first theme has been brutal competition, involving entrenched local players and Australian subsidiaries (and sometimes joint ventures) of global multinationals. In the US and the larger economies of Western Europe, insurers often seek to offset competitive pressures by developing their businesses in new, and sometimes distant, markets or by operating as composite insurers (i.e. with substantial non-life and life businesses) in order to reap economies of scale.

In Australia two of the three largest non-life firms are expanding into new markets. However, the country does not lend itself for substantial inwards or outwards cross-border selling of insurance (or other financial services), in part because of location, in part because of cultural differences vis-à-vis other countries that are promising markets in the Asia-Pacific region and in part because of its tax regime. Realising the scale benefits of operating as a composite insurer is difficult because, relative to other rich economies, Australia is only medium-sized.

This means that there really are no composite insurers. Companies typically have a strong position in non-life, or in life, but not both. Some 45% of the non-life segment is in the hands of two local players, each of whom is the result of a series of demutualisations and acquisitions. In the rest of the segment, most players focus on particular niches in which they believe that they have a competitive edge. Through 2006, competitive pressures were such that the non-life insurers collectively had to pass onto their customers much of the benefit of lower claims. In H107 conditions became tougher. Gross premiums have been growing by around 2% annually, or by a lot less than nominal GDP.

The growth of superannuation has the greatest implications for the life segment. In spite of the wealth and financial sophistication of Australia, life insurance premiums are still growing at double-digit rates. This is because life insurance products are used by and within superannuation funds which, as noted above, have been expanding in part because of the SG Levy contributions. In some countries pensions are in competition with insurance. This is absolutely not the case in Australia. The linkages between superannuation and life insurance mean that the biggest players are the local financial services groups which combine strong local brands with distribution power and, usually, a bancassurance offering. ING, through its relationship with ANZ Banking Group, is the only large multinational to take advantage of this. As is the case in the non-life segment, most life players are relatively small niche operators.

Contents of the Australia Insurance Report

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Table of Contents coming soon

Competitive Landscape for Asia Insurance Reports: Sample of
    Companies Ranked

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A cross-border overview of key players and their insurance market share across Asia. Tables and graphs show country presence of multinationals across the region. Comparative company analyses and rankings by premium income (life and non-life). Company SWOTS for leading life and non-life insurers, covering network of offices, presence of foreign stakeholders, strategic relationships, joint ventures; portfolio of clients; diversity of product range; profit growth, investment strategy and risk exposure.

Network of Insurance Sources

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BMI's Asian Insurance Reports are based on an extensive network of multilateral organisations, government departments, insurance industry associations, chambers of commerce and company reports. Information sources include:

Read about our other Insurance Reports