Australian Life Insurance Market Poised for Significant Growth

The industry is projected to register a compound annual growth rate (CAGR) of 3.9% in terms of gross written premiums (GWP) from 2025 to 2029. This growth is supported by economic recovery, an ageing population, increased health awareness, and escalating cost of living. Additionally, the recovery in household disposable income and consumption is expected to boost demand for life insurance products.

Medical inflation remains one of the biggest drivers of rising claims costs. The Australian Bureau of Statistics reported a 4.1% increase in health inflation in the first quarter of 2025 compared to a year earlier, which is expected to influence product pricing.

Ageing demographics are also reshaping demand. The share of Australians aged 65 and above is projected to exceed 22% by 2026, up from 16% in 2020. This shift, along with policy reforms such as the Aged Care Act 2024, is expected to increase awareness around financial planning and support demand for life and health products.

However, the cost-of-living crisis continues to pressure household budgets. A Cost of Living Index report shows 71% of Australians worry they may not be able to maintain or purchase life insurance. Affordability concerns are driving higher lapse rates and will likely push insurers to improve retention strategies.

In response to these challenges, insurers are expected to focus on developing flexible and cost-effective solutions to meet the needs of a diverse consumer base. The demand for life insurance is expected to grow, driven by a heightened awareness of financial security and the need for comprehensive coverage in an uncertain economic landscape.

This projected growth presents both opportunities and challenges for the Australian life insurance industry. Insurers will need to balance innovation and affordability to meet the evolving needs of consumers while ensuring the sustainability of their products.