Net non-life insurance premiums and non-life insurance claims
13.66 The premiums charged by non-life insurance corporations can be regarded as comprising two components:
- an implicit service charge; and
- a transfer payment to cover the risk of providing insurance cover.
13.67 The non-life insurance service charge is defined as premiums earned plus premium supplements less expected claims. Premium supplements represent income earned on the technical reserves of non-life insurance corporations, which consist of unearned premiums (most premiums are paid for a full year in advance) and unpaid claims (which arise because of delays in finalising the payment of claims). Premium supplements do not include any income from the investment of insurance corporations' own funds. The interest share of investment income is net of FISIM. Expected claims are generally defined as a centred five year moving average of claims incurred. To estimate expected claims it is necessary to forecast claims incurred for year t+1 and year t+2. A moving average is used to avoid irregular movements in the non-life insurance service charge which would otherwise arise because of volatility in the annual data for claims incurred.
13.68 Net non-life insurance premiums are defined as non-life insurance premiums and premium supplements less the non-life insurance service charge. This flow is regarded as a transfer payment from institutional sectors which use the services provided by non-life insurance corporations and is recorded as a use of income in the sectoral income accounts and a receipt of income for non-life insurance corporations in the financial corporations income account. Non-life insurance claims are the claims incurred in the current accounting period and are recorded in the sectoral income accounts as transfers from non-life insurance corporations to other institutional sectors.
13.69 Health insurance funds are treated as part of the non-life insurance subsector, and consequently net health insurance premiums and claims are included, respectively, as part of net non-life insurance premiums and non-life insurance claims. Workers' compensation schemes may be conducted either by specialist financial corporations whose only business is workers' compensation, or by non-life insurance corporations that provide non-life insurance for various classes of business. The operating surplus generated by workers' compensation business is included in the gross operating surplus for the financial corporations sector. However, workers' compensation premiums and claims are excluded from the transfer flows for net non-life insurance premiums and non-life insurance claims because they are shown separately as a component of social benefits and social contributions.
Sources and methods - Annual
13.70 The tables below outline the data sources and methods used in the estimation of annual net non-life insurance premiums and non-life insurance claims in current prices.
Annual estimates for net premiums and claims for non-life insurance are compiled using data published by:
|Net non-life insurance premiums|
Net non-life insurance premiums is calculated as
where ISC = premiums + premium supplements - expected claims
It follows that Net non-life insurance premiums = Expected claims
The derivation of the annual total insurance service charge for non-life insurance (see Table 9.22 ANNUAL GROSS VALUE ADDED BY INDUSTRY- Insurance and superannuation funds (ANZSIC Subdivision 63)), is compiled at the elemental insurance business class level; that is, ISC is calculated for types of insurance products such as workers' compensation. The compilation of total ISC output enables the allocation of ISC by final use (household final consumption expenditure) and intermediate consumption directly. Intermediate consumption of ISC is classified by:
|Non-life insurance claims|
Non-life insurance claims are equal to actual claims.
The compilation methodology for sectoral ISC requires sectoral actual claims estimates.
Sources and methods - Quarterly
13.71 The tables below outline the data sources and methods used in the estimation of quarterly net non-life insurance premiums and non-life insurance claims in current prices.
|Net non-life insurance premiums|
Quarterly estimates of net non-life insurance premiums and claims are compiled by applying a linear trend formula to the annual estimates.
Quarterly non-life insurance claims paid by financial corporations and received by households and private non-financial corporations are then adjusted for the insurance cost of natural disasters, which is sourced from the Insurance Council of Australia. The adjustment is split between non-life insurance claims received by households and private non-financial corporations based on their annual contribution to the total.
There exists a small quarterly imbalance between the rest of the world and the domestic sectors non-life insurance flows as they are derived separately. This imbalance is balanced off in financial corporations' non-life insurance claims payable as it is the largest non-life insurance series, and where the imbalance has the smallest impact.