riskinfo » News » MLC Rates Update May 2008

MLC has recently implemented a set of pricing changes across its lump sum product range.

Effective from 26 May 2008, two main enhancements have been implemented:

Reductions on Life Cover level premiums
Increasing the Large Case Discount rates across customers holding Critical Illness insurance

Details for each of these initiatives follow:

Reductions to Life Cover and TPD Level Premiums

MLC has reduced level premium rates for existing and new customers who have Life Cover and/or Total & Permanent Disability (TPD) extension cover.

The base rates for level premium cover will change as follows:

Reductions on Life Cover level premiums of 8% - 14% for ages up to 55
Reductions on TPD extension level premiums of 8% - 10% for ages up to 65

MLC reports that overall, 13,500 of its policy holders will receive a discount on their Life Cover and/or TPD extension policies with level premium structure.

In addition, 70% of these MLC customers with Life Cover and/or TPD extension benefits will receive a rate reduction of at least 8%.

MLC’s rationale for this enhancement is that it believes that:

“…insurance should be held for the long term and that there are strong benefits for both customers and advisers to use the level premium structure.

The changes to level premiums reflect MLC’s focus in ensuring that the long term insurance is affordable and customers having protection in place when they need it most.”

These rates changes will apply to all new clients and all existing policy holders from the first anniversary of the effective date of 26 May 2008.

The company outlines the following benefits for both advisers and clients:

For advisers:

Enables long term business that is more likely to remain in place and therefore more certain cashflow
Additional cashflow in early years due to commission rates being applied to higher premiums

For clients:

The total cost of insurance premiums paid over the lifetime will be lower
Increases the client’s ability to afford insurance when the risk of claim is the highest

Commenting on these changes, MLC’s Head of Individual Risk, David Evans, said:

“The rate reductions on level premiums reflect MLC’s focus on ensuring clients have protection in place when they need it most. Rather than premiums skyrocketing as people get older, level premiums remain stable and more affordable. In an environment of rising household costs this is as important as ever.”

Interestingly, at a time when there seems to be more conspicuous activity from the life companies as well as greater agitation from advisers regarding the value of a level insurance premium option for some clients, Mr Evans also added this point:

“Financial advisers have the responsibility to ensure their insurance clients have considered a level premium as it can be crucial in helping to meet their long-term needs.”

Increasing Large Case Discount Rates - Critical Illness

MLC has increased the Large Case Discount rates for existing and new customers holding Critical Illness insurance.

Previously, MLC offered two Large Case Discount bands for customers who have Critical Illness on stepped and level premium structures. From 26 May 2008, an enhanced structure will apply.

Because each client’s large case discount is now a function of their age, gender and smoking status, MLC cites the following examples to give an indication of the scale of impact of this more generous large case discount structure:

For insured benefits greater than $500,000, increases to large case discounts on Critical Illness will extend between 0% - 10%
For benefits greater than $1,000,000, increases to large case discounts on Critical Illness will extend between 0% - 15%

According to MLC, this enhancement has been effected to ensure the insurer’s product remains competitive and affordable in the marketplace.

These rates apply to all policy holders of products within the MLC Personal Protection Portfolio (PPP) range as follows:

Critical Illness extension on Stepped Premium, Decreasing Cover and Level Premium structures
Critical Illness Stand Alone on Stepped Premium and Decreasing Cover structure only (level premiums structure not offered)

MLC summarises the adviser and client benefits as follows:

For advisers:

Enables advisers to sell the benefits of MLC Critical Illness cover to new and existing clients, in particular for large sums insured for clients aged in their mid 40’s and above

For clients:

The total cost of paying MLC Critical Illness insurance cover will be lower.

MLC advises this round of initiatives is one component within a broader update strategy for 2008, which comprises: