The life industry is showing signs of recovery, demonstrating its resilience in managing the economic upheavals of the pandemic, KPMG said today in a review based on analysis of statistics from the prudential regulator.
The data released in August by the Australian Prudential Regulation Authority (APRA) shows the industry made an overall net profit of $1 billion in the year to June 30, compared with a $1.7 billion loss in the preceding period.
“The past year has seen a period of continued disruption, with the impact and uncertainty of COVID-19 magnifying the challenges of a dynamic and evolving regulatory environment,” KPMG said.
“Despite this, financial results show signs of recovery compared to recent years.”
KPMG says the improved results have been achieved while the industry has had to prepare for an array of regulatory changes that commenced this year, including a few key reforms this month such as the design and distribution obligations regime and new breach reporting rules.
Other changes that insurers have had to cope with include the industry revamp of the individual disability income insurance (DII) product.
“The 2020/21 year was the first full year of the pandemic for the life sector, and while the long-term impacts are still uncertain, the immediate results were not as bad as some had feared,” KPMG Insurance Sector Lead David Kells said.
“There was an expectation that death claims would initially increase and then begin to fall as the pandemic extended and restrictions continued, due to reduced levels of accidents and respiratory related deaths.
“However lump sum claims experience appears to have been relatively stable… The unprecedented actions by government to maintain jobs and support companies potentially mitigated the cost to the insurance industry.”
KPMG says despite the improved financial results observed, the recent period of change and disruption in the market is expected to continue over the coming year.
The long-term claims impact of COVID on individual DII and other risk products is still highly uncertain, the consultancy said.
“Historically impacts on employment can take up to 18 months to translate into increased claims,” KPMG said.
“The impact on mental health in the community continues to be high, but it is unclear whether it also [is] high in the insured population.”
Click here for more from the KPMG review.