Digital distribution, embedded cover and illness fears will sustain personal accident and health insurance in Australia through to 2030, according to GlobalData.

The segment will grow by more than 4% a year despite intense competition and the challenge of pricing cycles, because rising health costs – including higher out-of-pocket expenses – are prompting greater uptake, the research group says.

Senior insurance analyst Swarup Kumar Sahoo says that while the broader insurance market is in a softening rate cycle, health premiums have moved up, signalling a complex operating environment in which affordability pressures coexist with robust demand.

GlobalData forecasts a direct written premium compound annual growth rate of 4.6%, from $35.7 billion next year to $42.8 billion by 2030.

It expects a 4% rise in premiums next year, based on insurers’ requests to the government last month.

Mr Sahoo says an ageing population will support the rise in premiums.

“The risk of heatwaves is prominent in Australia, leading to increased mortality in urban areas and putting pressure on health expenditure and insurance claims.”

He says this may encourage product innovation, while technologies such as AI may improve access and customer experience.