AHIA 2011 Conference presentation by Bernard Salt on the Demographic Outlook for Health Insurance in Australia in the 2010s

1. AHIA
Demographic Outlook for Health
Insurance in Australia in the 2010s
Bernard Salt
10 November 2011

2. Disclaimer
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the sources of the information provided. KPMG has not sought to independently verify those
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either oral or written form, for events occurring after the presentation has been issued in final
form. The findings in this presentation have been formed on the above basis.
Forecasts are based on a number of assumptions and estimates and are subject to
contingencies and uncertainties. Forecasts should not be regarded as a representation or
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constitute judgment and are subject to change without notice, as are statements about market
trends, which are based on current market conditions.
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International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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3. Australians are on the move … to the coast
Areas of high
population growth
(>2% pa) and loss DARWIN
(<-1% pa) between
1986 and 2010
Cairns-Port Douglas
Broome
TOWNSVILLE
Mackay
FIFO WEST Gladstone
FIFO EAST Bundaberg
Hervey Bay
Sunshine Coast
FIFO Gold Coast
Byron Bay
CENTRAL
Coffs Harbour
PERTH Port Macquarie
Port Stephens
Augusta- Narooma
Margaret Denmark
River Victor Harbor
Winners
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG Surf Coast
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative Sorell
Losers
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.
Source: Based on Australian Bureau of Statistics data; KPMG

4. Australia is shifting from Mediterranean to Asian influences
Growing Extra 2010
1. India 245,000 341,000
2. China 232,000 380,000
3. New Zealand 175,000 544,000
4. South Africa 75,000 156,000
5. Philippines 67,000 177,000
Contracting Loss 2010
1. Italy -26,000 216,000
2. Greece -7,000 127,000
3. Poland -7,000 58,000
4. Malta -4,000 49,000
5. Netherlands -3,000 89,000
• Most growth and loss by place of birth in Australia, 2000 - 2010
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

5. Other tribes on the rise …
• Facebook …
• PUMCINS ….
• NETTELs …
• KIPPERS …
• LOMBARDs …
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

6. Anticipate demand around changes in the Australian
demographic profile
2000-2010: 3.2 million or 19m – 22m
2010-2020: 3.3 million or 22m – 25m Retirees
Mature adults • Retirees health cover
• Top hospital cover • Heart conditions
450,000
• Knee replacements • Chronic disease
Young adults • Weight loss
400,000
• Singles/couples health cover
350,000
• Obstetrics
• Sports injuries
300,000
Kids & teenagers
250,000 • Family health cover
• Child healthcare
200,000
150,000
100,000
50,000
0
0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+
2000-10 2010-20
• Net change in Australian population by 5-year age group over 10 years to 2010
and 10 years to 2020
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

7. Increasing life expectancy is creating new stages of the
lifecycle and new markets for health insurance
Child Adolescence Adult Lifestyle Retired Old
2011
82
Child Teen Adult Old
1971 71
Child Adult Old
1931 63
0 10 20 30 40 50 60 70 80 90
• Change in life expectancy over 80 years in Australia
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

8. Who is … what is … Generation Y?
Raised in
prosperity
Born 1976-1991 Single kids
Unfazed Disappointed
Culture of
volunteering
by
authority generation
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

9. Health insurance peaks in the 3rd quarter of life
20 40 60 80
Dependence Development Peak Income Lifestyle Departure
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
• Average annual income per income-earner by single year in 2006
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation. Source: Based on Australian Bureau of Statistics data; KPMG

10. Boomer and pre-boomer households spend most on
medical insurance in Australia
$1,800 $30
$1,600
(Hospital, medical, dental & Sickness, personal accident)
$25
$1,400
Average weekly household expenditure
Average weekly household expenditure
$1,200 $20
(Ambulance)
$1,000
$15
$800
$600 $10
$400
$5
$200
$0 $0
15-19
20-21
22-23
24-25
26-27
28-29
30-31
32-33
34-35
36-37
38-39
40-41
42-43
44-45
46-47
48-49
50-51
52-53
54-55
56-57
58-59
60-61
62-63
64-65
66-67
68-69
70-71
72-73
74-75
76-77
78-79
80+
Sickness & personal accident Ambulance (separate insurance) Hospital, medical & dental
• Average weekly spend on health insurances in Australia, 2009 - 2010
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics Household Expenditure Survey data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

11. Australia is moving from baby boom to baby bust … we
need either more tax or more tax payers
1950 2000 2050
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
-50,000
-100,000
1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056
ERP Proj-0k NOM Proj-70k NOM Proj-180k NOM Dwelling Commencements (public and private)
• Net growth in working age population (15-64) over 100 years in Australia
based on 2008 outlook with different annual migration assumptions
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative Source: Based on Australian Bureau of Statistics data; KPMG
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

12. There has been a structural shift in the Australian economy
… less low-skilled work … more highly-skilled work
Health 3 years Aug 2011 – up 501k (10.8m – 11.3m)
210,000
3 years Aug 2008 – up 853k (10.0m – 10.8m)
190,000
170,000
Construction,
150,000 Professionals Education
130,000
110,000 Transport, Retail,
90,000 Other, Wholesale
70,000
Manufacturing
50,000
30,000
10,000
-10,000
-30,000
-50,000
More skills Less skills
-70,000
-90,000
-110,000
2005-2008 2008-2011
• Net change in total jobs in Australia over two successive three-year periods,
August 2005 – August 2011
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

13. Baby boomers will re-engineer retirement in the coming
decade … beware the rise of the grumpy retiree!
1950 2000 2050
150,000
140,000
130,000
130,000
120,000
Population growth
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
1950 1954 1958 1962 196 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
• Net growth in population (65+) over 100 years in Australia
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Source: Based on Australian Bureau of Statistics data; KPMG
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

14. Australia will benefit from rise of “The Dubai Effect”
London Moscow
New York
Shanghai
Dubai Hong Kong
Singapore
Sydney
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

15. The GFC has prompted the rise of the ‘moral consumer’
Then 1997 - 2008 Recession Now 2009+
• Era of high consumerism … and of • Rise of the moral consumer … the new
‘corporate high-flyers’ Wowserism … seeks value on internet
• ‘Live for the moment’ … pay in the • Anti-drinking, smoking, speeding,
future gambling, junk-food (obesity) …
concern about corporate excess
• Plasma TVs, McMansions, Manolo
Blahnik shoes • Rise of Green, ethical & traditional
values … celebrities
• Easy credit … rising house prices
• Fear drives a retreat to the security of
• Celebration of the individual … the herd, the tribe, the family, familiar
confidence in the future and in brands?
ourselves
Consumers driven by Consumers driven by a
“Aspirationalism” “New Morality”
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

16. The Great Australasian Man Drought … Stage 3A
restrictions now apply
The Great Australasian Man Drought … Stage 3A restrictions now apply
10%
More men
Boy Town
5%
Man Mountain
27 58 65
0%
Man Drought Widow
More women
-5% World
35
-10%
35
-15%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74
Australia New Zealand
• Percentage difference in the number of men and women in Australia and New
Zealand by individual year in 2006
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
Source: Based on Australian Bureau of Statistics data; Statistics New Zealand data; KPMG
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.

17. Contact
Bernard Salt
KPMG Australia
+61 3 9288 5047
bsalt@kpmg.com.au
www.bernardsalt.com.au
twitter.com/bernardsalt
linkedin.com/in/bernardsalt
facebook.com/BernardSaltDemographer
© 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative
("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.