Life Insurance Outlook For 2024: AI To Play An Increasing Role (2024)

The overall expenditure on life insurance in Australia has been rising over the past few years, with a 14% increase in total market activity between June 2019 to June 2023. However, much of this growth has come due to the increase in insurance premiums over this period on account of inflation as well as price increases.

Life insurance premium income for the Australian market increased by 4.1% to $18.6 billion for the year to June 2023, the latest period for which Australian Prudential Regulation Authority statistics are available.

Overall profits for the sector doubled to $1.2 billion for the year to June 30, but this was entirely on account of a $1.3 billion profit in non-risk products, such as those with an investment component. Profits for the industry’s core risk products actually declined $0.8 billion.

Anthony Brown, CEO at NobleOak Life Insurance says overall, 2023 has been a challenging year for the industry.

“While the pace of regulatory change has slowed, previous changes are still bedding down and the cost-of-living pressures for all Australians—including our customers—are significant.”

Related: Our Pick of the Best Life Insurance Providers

A recent survey commissioned by NobleOak found cost of living pressures are significantly affecting people’s financial decisions. This is especially pertinent to life insurance, where premiums can vary significantly depending on factors such as age, gender, occupation, medical history and lifestyle choices.

The survey, which covered more than 1,000 individuals during December 2023, revealed that 41% of respondents were concerned about their current financial situation and 35% did not feel in full control of their personal finances.

Despite this, it found respondents were keen to prioritise life insurance more than ever before, even being prepared to reduce their grocery bills to keep their cover. In addition, more people who hold life insurance are planning to renew this year (65%) than ever before.

“It is important for life insurers to be agile in adapting their products and services to align with the changing needs and circ*mstances of customers and to ensure Australians are informed and educated on insurance to help them maintain financial security,” Brown said.

The current year is set to be a dynamic one for the life insurance industry, marked by a delicate balance between addressing economic challenges, aligning with the evolving regulatory framework and harnessing the power of technology.

Brown expects three major trends to be in focus for the year ahead:

• Cost-of-living pressures: The industry is closely monitoring the impact of rising cost-of-living pressures on individuals and families. “As these pressures increase, we expect to see a significant influence on the premiums customers are willing to pay. However, we know from feedback from customers and our recent survey that Australians are aware life insurance is crucial in the current climate,” he said.
• Technology and AI integration: Brown expects this to play a pivotal role in enhancing customer experience for e.g. through personalised services, as well as to streamlining back-office functions. Embracing innovation will be key to staying competitive and meeting the evolving expectations of customers.
• Regulatory focus on sustainability and fair practices: Regulators are already placing an increased emphasis on sustainability, fair pricing, and ethical design and distribution of insurance policies. It shows a growing commitment to ensuring that insurance products are developed with the customer front of mind.

Insurers point to customers’ changing buying behaviour as an example of the growing importance of technology for the life insurance industry, with more customers transacting online compared to over the phone.

According to NobleOak’s recent survey, a quarter of the respondents who currently hold life insurance products had bought their cover completely online. In line with that trend, 53% of respondents with life insurance said their most preferred way of purchasing life insurance and income protection products was through the insurer’s website.

Brown believes artificial intelligence will be used a lot more in 2024 and beyond as customers look for quicker, more convenient and personalised interactions.

“The integration of technology from AI chatbots for customer service to self-service apps for managing policies, is transforming the way customers engage with their insurance providers. This shift is pushing life insurance companies to continually innovate,” he said.

Other areas where technology and AI are being used increasingly include:

• Risk assessment and pricing: AI algorithms can analyse vast datasets, including from non-traditional data sources, to more accurately assess risk, which can lead to more personalised pricing and policy terms, aligning coverage more closely to individual risk profiles.
• Back-office tasks: A seamless blend of automation and AI for routine back-office tasks can make processes like claims handling and risk assessment more efficient and accurate. Predictive analytics will also offer deeper insights for forecasting, decision-making, and more intuitive insurance applications.

APRA and the Australian Securities and Investments Commission (ASIC) last month addressed the issues of premium hikes and misleading disclosures by the life insurance industry, highlighted recently in reviews by insurance companies themselves.

They drew attention to concerns that some insurers have not applied premium increases correctly to their retail policies in line with their policy terms. The two industry watchdogs also emphasised the importance of providing policyholders with clarity on premiums and potential changes throughout the policy’s duration and of transparent disclosure and marketing materials.

Brown says there will be an increased focus on the way in which premiums and premium increases are communicated to customers industry wide. Part of this will include the introduction of new wording on how premiums work and change over time to help customers better understand how the products operate.

“We expect there to be a positive impact from the increased regulatory standards, as customers may feel more confident in purchasing insurance, with a better understanding of the costs and benefits involved,” he said.