Australia’s personal accident and health (PA&H) insurance industry is forecasted to grow at a compound annual growth rate (CAGR) of 6.4% from AUD32 billion ($22.1 billion) in 2024 to AUD41 billion ($27.8 billion) in 2028, in terms of direct written premiums (DWP), according to GlobalData, a leading data, and analytics company.

According to GlobalData’s Insurance Database, Australia’s PA&H insurance industry is expected to grow by 5.9% in 2024, driven by increased health awareness after the COVID-19 pandemic, rising healthcare costs, and the changing demographics such as an aging population that has increased the demand for private health insurance (PHI).

Prasanth Katam, Insurance Analyst at GlobalData, comments: “Australia’s PA&H insurance industry continued its growth momentum from 2022 and grew by 6.4% in 2023, registering the highest growth in the last five years. The growth can be attributed to an increase in the membership of private health insurance. The trend is expected to continue in 2024.”

With hospital and treatment costs soaring after the pandemic, many Australians have opted for voluntary PHI policies over and above public health insurance as they offer higher coverage, timely access to treatments, as well as flexible and convenient care options.

As per Private Healthcare Australia (PHA), 55.1% of the Australian population has opted for private health insurance as of November 2023. The number of people opting for private health insurance in the country increased to 14.7 million people as of November 2023, indicating an annual growth rate of 2.3% compared to 14.37 million Australians in November 2022.

The demand for hospital treatment coverage increased in 2023, with demographics like young families and children under the age of five witnessing significant growth. According to the Australian Prudential Regulation Authority (APRA), for individuals aged between 40 and 44, there was a net increase in PHI membership of 7,298 individuals while the PHI membership of children aged 0-4 years increased by 24,407 during the quarter ending December 31, 2023, as compared to the previous quarter.

Katam continues: “Changes in the country’s demographic factors such as the aging population as well as a rise in chronic diseases such as diabetes and heart diseases will increase the demand for health insurance, supporting PA&H insurance growth.”

According to the Australian Bureau of Statistics (ABS), 49.9% of Australians had at least one chronic condition in 2022 and 20% had two or more chronic conditions. 80% of Australians with chronic conditions are aged 65 and over.

In addition to growing healthcare demand, increasing cost of claims due to rising inflation is another focus area for insurers. Due to higher costs, insurers are prompted to reassess their risk exposure and increase the health insurance premium prices, which will support PA&H insurance growth in the short term. From April 1, 2024, the government approved an average of 3.03% increase in PHI premiums.

Katam concludes: “The rising healthcare costs are putting pressure on premiums, which will make people selective while purchasing health insurance. However, the increased premiums are not expected to have a significant negative impact on the growth of the Australian PA&H industry over the next five years.”