Insurance companies had a tough time last year

The popularity of insurance bonds continues to decline, with sales falling sharply in the year ending June 30.

The bonds were an attractive investment in the early and mid 1990’s largely because they helped people avoid the superannuation surcharge.

However, the tax was scrapped in 1998 and industry figures out yesterday show sales have fallen by more than a quarter in the past year.

The data, from the Investment Savings and Insurance Association (ISI), shows single premium business done by insurers was worth about $175 million last year.

That was down nearly 29% on the previous year’s result of $245 million, and down 52% on 1999 year.

The biggest product within the single premium category is insurance bonds.

"They are just not very attractive in the current environment," ISI chief executive Vance Arkinstall says.

Annual premium income for new business rose 3.2% to $175 million during the year, while annual premium income for existing business was flat at $1.09 billion.

Insurance and superannuation firms also experienced a sharp drop in cash flow during the year.

This was largely due to a fall in world investment markets, Arkinstall says.

Investment income dropped nearly 86% to $212 million, though premium income was up just over 2% to $2.6 billion.

"After a number of years of good returns, the last 12 months has been painful."

The one consolation was that tax paid by insurers and superannuation firms fell by two thirds.

Commissions were also up nearly 12% during the year.

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