KPMG’s Life Insurance Insights report offers a comprehensive analysis of the financial performance and trends within the Australian life insurance market, based on data available up to 30 June 2025. The 2025 analysis, which traditionally relied on APRA data, was enhanced to include insights derived from insurers' financial results under AASB 17. By leveraging the detailed disclosures afforded through AASB 17, this report provides a deeper understanding of the industry’s financial landscape.
Sustainability: A key focus area for the life insurance sector
Sustainability remains a key focus for the life insurance sector. While profitability for Income Protection (IDII) and Group Salary Continuance (GSC) products appears to have stabilised, Group and Individual lump sum products saw a decline in profits during FY 2025. Losses in the Group lump sum segment, for example, are understood to be influenced by factors such as an increase in adverse Total and Permanent Disability (TPD) experience and higher levels of mental health-related claims – trends that have been widely observed across the sector. This challenge is highlighted by the recent decision by a reinsurer to pause new business activities in Australia from October 2025 citing sustainability concerns particularly for TPD.
These trends have unfolded within a challenging economic environment, characterised by inflation and interest rates remaining above pre-COVID levels, contributing to rising cost-of-living pressures and an uptick in unemployment. While the dashboard analysis concludes on 30 June 2025, data from September 2025 indicates a reversal in the downward trend of inflation observed since December 2022, alongside continued increases in unemployment. Although higher interest rates can reduce the cost of claim reserves for insurers, the associated cost-of-living pressures may lead to increased claim rates.
The transition to AASB 17 changed balance sheets and profitability patterns, however obviously this is a change only to accounting profitability with underlying profitability unchanged.
Equity decreased by 31% for direct insurers and 9% for reinsurers, as many companies used the transition to AASB 17 as an opportunity to write-off of historical acquisition costs, particularly within portfolios measured under the Premium Allocation Approach.
This shift is expected to contribute to the higher reported profitability levels for IDII portfolios compared to prior years.
- Overview
- Market size
- Financial performance
- AASB 17
Market size
The size of the market as measured by annual premium has not grown, with life insurance premium income (excluding reinsurance) of $18.3b compared to $18.4b in FY2024 and $18.2b in FY2023.
The number of lives insured by the market increased with 1% more lives at 30 June 2025 than the previous year. Premiums have been sustained through increases reflecting inflation where benefits increase each with inflation, age increases as well as premium increases.
In the individual advised (retail) channel premium rates over the past 12 months increased by 3.2% for death cover (similar to inflation), 5.4% for TPD cover (indicating that repricing of TPD due to adverse experience may be occurring) and 1.6% for IDII cover. The lower increase for IDII likely reflects that premium rates on new business are lower due to the new sustainable product design which came into effect on 1 October 2021. By contrast the average premium in the group superannuation channel decreased by 6% over the last 12 months largely driven from decreases in TPD and GSC which reflects changes in benefit design as well as genuine premium decreases.
Lapse rates for individual advised business decreased in the 6 months to 30 June 2025 (16% lapses for death cover) after peaking in the 6 months to 30 June 2024 at 22%. Lapse rates are similar to pre-COVID levels suggesting that the cost of living pressures on the industry have decreased.
The number of registered IFA’s in the market has marginally decreased over the past 2 years with 15,869 advisers at 31 December 2024 compared to 16,350 advisers at 31 December 2022. Despite the 3% decrease in adviser numbers, new business rates have increased although still below pre-COVID levels. Death new business rates were 3.4% over the 6 months to 31 December 2024 compared to 3.0% a year earlier and 2.7% in the prior year.
Financial performance
Industry profits of $1.1b were recorded in the year to June 2025, which reflected profits were generated in the Insurers’ Statutory Funds. APRA data for the first 3 months of the prior year is not available but profits the 9 months to 30 June 2025 ($0.7b) were more than double the equivalent period in the prior year ($0.3b).
Product level profitability insights are limited to the insurance service result. The $1.7b of insurance service result underpinned by $1.1b within individual and group lump sum and disability income benefits with the balance coming from conventional products ($0.4b), annuities ($0.1b) and other investment products.
The insurance service result was negative over FY25 for group lump sum risk and individual lump sum risk (level premium4).
The insurance service result of level premium benefits improved by $0.3b in the 9 months to 30 June 2024 compared to the prior period. This improvement may reflect the increased focus on level premium products with AASB17 requiring them to be reported separately to stepped premium. By contrast the insurance service result of stepped premium products decreased by $0.1b, predominantly due to disability income insurance. Group lump sum risk decreased by $0.2b which was mostly offset by an increase of $0.2b in GSC.
The gross claims experience5 increased in the 9 months to 30 June 2025 compared to prior period by 20% ($0.5b) for individual lump sum risk and 12% ($0.1b) for individual disability insurance.
Other insurance expenses as a proportion of premium increased from 15% in the 9 months to 30 June 2024 to 18% in the 12 months to 30 June 2025. This reflects companies' ongoing focus on embedding business efficiencies to improve profit outcomes with the industry providing limited growth.
4. This is Other Premium in the APRA statistics and will include level premium and hybrid premium outcomes.
5. Incurred claims and changes in liabilities for incurred claims
AASB 17
Companies have made a range of different decisions in implementing AASB 17 which impact profit patterns. These include risk adjustments with 7 insurers in FY2024 having an insurance risk margin of 75%, but the margins range from 55% to 90%.
The average reinsurer risk margin was 71% compared to the average insurer risk margin of 79%.
- Eleven insurers insurers including all 7 reinsurers value their entire portfolio using the General Measurement Model and if applicable the Variable Fee Approach. Amongst direct insurers for example 4 insurers use the Premium Allocation Approach and 3 use the General Measurement Model to value group risk contracts and 6 insurers use the Premium Allocation Approach and 6 use the General Measurement Model to value stepped premium contracts.
- Twelve companies increased their LIC between their 2023 and 2024 accounts.
- Two companies companies in FY2024 had loss components larger than their CSM and a further 3 companies had loss components larger than 50% of their CSM. Three companies had more losses than CSM recognised on their new business contracts. One company had new CSM greater than the released CSM.
KPMG Life Insurance Insights Dashboard
KPMG's Life Insurance Insights Interactive Dashboard presents analysis based on a combination of leading analytics applied to APRA published statistics, supported by insights from our Life Insurance specialists.
Life insurance market snapshot
An infographic snapshot of life insurance market data to June 2025.
Life insurance market outlook
The industry is currently focused on a significant increase in TPD claims relating to mental health. The impact of this increase has not significantly impacted profits. This reflects that there is often a 1-2 year delay in changes in claims experience being incorporated into actuarial assumptions as companies assess whether the adverse experience represents a step change in underlying experience or is due to volatility.
The recent decrease in lapse experience is positive however new business volumes are still not sufficient to replace lapses. It is unclear how advances in AI may disrupt the current distribution channels.
The adoption of longevity products remains low but represents a potential growth area as advisers and superannuation funds explore solutions to meet diverse customer needs. Key drivers include advice reforms, APRA's focus, and the Treasury's consultation on retirement best practise principles and reporting frameworks. Life insurers can play a pivotal role by supporting fund education and member engagement, as well as collaborating with advisers to enhance distribution and customer alignment.
We expect the following to be key areas of focus for life insurers during the next 12 months and beyond.
Although the impact shown in the financials is limited, industry level claims analytics and anecdotal discussions across industry are showing significant and sustained increases in TPD experience particularly from mental health claims. It is unclear how the workers’ compensation changes in Victoria to limit mental health claims and proposed legislation in NSW may further impact claims experience.
Organic market growth continues to prove challenging for the industry.
Group insurance
The group life market remains concentrated among a few providers, with APRA’s push for superannuation fund consolidation further contributing to this trend. While the market contracted significantly after regulatory changes like Protect Your Super (PYS) and Putting Members’ Interest First (PMIF), it has stabilised over the past two years. Group super benefits declined from 29.7m in 2019 to 21.9m in 2025. Super funds continue their focus on managing account erosion impacts from premium rates when adjusting premiums or insurance design. Growth opportunities lie in enhancing member personalisation through digital tools and education, while insurers continue investing in technology to streamline processes and improve alignment with customer expectations. These advancements aim to better serve unadvised members and strengthen connections with advisers, addressing member retention challenges.
Individual advised
Lapse rates decreased in the year to 30 June 2025, across lump sum and IDII benefits, and new business rates increased, however the number of lives insured still decreased over the year. This will be influenced by several factors, including the low number of registered IFAs, increasing premium rates and the economic environment.
Individual non-advised
The direct market was heavily impacted by the reforms following the Royal Commission, with lives insured decreasing to 2.7m at 30 June 2025 from 5.7m at 30 June 2018, with most of the change flowing from the decrease in Consumer Credit Insurance (moving from 3.0m to 0.8m lives insured).
The number of benefits insured, summed across cover and channel types has stabilised as the initial impacts of the PYS and PMIF legislation have flowed through.
The average premium per policy continued to increase for individual advised business, although at a slower pace. Disability insurance and TPD with increases of 2% and 5% respectively over the past year and 21% and 28% respectively over the past 3 years.
By contrast, the average premium per life insured has decreased over the past year in group superannuation. Disability insurance and TPD with decreases of 9% over the past year with decreases of 13% and 0% respectively over the past 3 years.
Decline rates decreased across the industry over the last 12 months. TPD traditionally has the highest decline rate at 8.5% for Group Super (increased from 7.7% last year) and 17.1% for Individual Advised (increased from 16.5% last year).
Life insurers successfully implemented AASB 17, but many processes remain heavily reliant on manual workarounds—tactical processes that supported AASB 17 compliance but were not originally intended to support in the longer term. These manual processes increase operational risk and consume valuable time each reporting date.
Automation offers a clear path forward for insurance finance teams, enabling insurers to streamline data flows, reduce spreadsheet dependency, and embed real-time controls that improve accuracy and audit readiness.
The most significant potential lies in using AI to evolve these manual compliance-orientated processes into intelligent, automated workflows and freeing up capability to focus on more complex and enriching initiatives. AI-driven solutions are capable of conducting real-time reconciliations, producing timely initial commentary on financial performance, generating and validating financial disclosures, and verifying complex calculations efficiently – with a human-in-the-loop to provide governance and oversight. In KPMG's AI in finance report, 96% of the cohort of leading AI adopters globally said that the ROI from AI in their finance process was beating their expectations.
Progressive insurance finance teams are adopting automation to expedite reporting cycles, strengthen governance, and position finance departments as strategic collaborators fostering growth and resilience.
Operational Resilience CPS230
With the implementation of CPS 230 effective from 1 July 2025, insurers should have operationalised and embedded their Operational Resilience frameworks in compliance with the new regulatory standard. The focus now shifts to strengthening organisational resilience and risk management practices across the enterprise to proactively address emerging risks, respond to evolving regulatory obligations, and achieve sustained business value.
Levels of maturity across operational risk, third-party risk management, cyber security, controls, governance, and business continuity will vary between organisations, as will the extent of enhancement required.
Insurers with robust comprehensive risk and resilience frameworks, supported by consistent behaviours and practices throughout the business, are better equipped to meet increasing expectations from regulators and to respond effectively to existential threats.
In contrast, those at earlier stages of maturity are prioritising where they need to uplift – and how to achieve this efficiently including through the use of intelligent automation, technology and data.
Systems and data
Regulatory changes and requirements have driven and continue to drive developments in data quality and systems and companies move from resolving the increased complexity around systems, data and analysis introduced by APRA’s IDII requirements and AASB 17 to considering APRA’s data collection roadmap.
Beyond APRA’s growing expectations of the industry, data continues to be high on the agenda for all insurers. Many insurers have moved beyond data strategy, data quality improvements or the upgrading of systems and data infrastructure. Insurers are not only experimenting but also yielding benefits from Artificial Intelligence and other advanced technologies to test specific use cases around claims management, underwriting, customer experience and general productivity improvements. The key challenges with these initiatives include prioritisation, ensuring an acceptable rate of return, accessing the right expertise, risk and ethics considerations and change management.
Get in touch
Will Tipping
Partner, CFO Advisory | Global Digital Lead Partner, Accounting Advisory Services
KPMG Australia
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Footnotes
- Prior year measured based on 9 months to 30 June 2024 in the APRA statistics.
- Calculated as the sum of lives insured across each cover and channel types. This doesn’t represent the number of individuals insured (as an individual may have multiple covers).
- Reflects profits of Life Insurance Statutory Funds, as opposed to the Entity in the APRA Performance Statistics.
- Calculated as a weighted average rate across different cover and channel types using the APRA Claims and Dispute statistics which contains only Risk Products.