Asteron Life has stated it will not lift premium rates on newly written business when the clawback period of the Life Insurance Framework (LIF) begins in the middle of 2016.
The action by the insurer, which also announced increases to hybrid commissions, dial up customised commissions and discounts on wholesale premiums, makes Asteron Life the first life insurer to take a public position around premium levels under LIF.
In making the announcement Asteron Life stated it “will extend its premium rate guarantee to remain in line with any LIF regulated changes to your commission claw back period”. The claw back period was altered late last week from three years to two years.
“This means we will not reprice a customer, who first applies for an Asteron Life Complete (ALC) policy effective from the date when regulated clawback changes are introduced, during the initial compulsory clawback period of the policy.”
While the premium freeze would go live from 1 January 2016, the initial start date for LIF, the insurer stated it would not apply to premium increases for age on stepped premiums and that CPI increases would also continue as per usual.
Asteron Life, Executive Manager, Mark Vilo, said the premium freeze was in response to adviser feedback and was designed to assist advisers retain clients and avoid lapses due to price increase during the first years of a policy.
“We know that affordability can often be a key driver for lapses and by making this commitment, advisers can give their clients certainty without the concern of trying to manage a premium increase that wasn’t anticipated,” Vilo said.
“We know from our own statistics that around 5 per cent of policies lapse in the first year, 12.6 per cent in year two and 12.3 per cent in year three. The top reason cited for lapses is price increases.”
“In simplistic terms, if you had 100 policies in force today, at the end of year five you would only have around 56 policies left. That’s a sustainability challenge we have to work hard to improve.”
As part of the announcement Asteron Life also stated that hybrid commissions would be increased by 10% to 88% initial commission and 22% ongoing commission and advisers would be able to adopt a customised commission rate, dialled up from 0% in 2% increments to a maximum of 88% initial commission.
This would be useful for “advisers who want to explore an alternative business model” with advisers able to customise the initial and ongoing commission independently of each other.
Other changes also introduced by the insurer include a 15% discount on a client premium for the first year on new business if an adviser uses Asteron’s no commission wholesale rate, which would be added to the current 25% premium reduction clients presently receive under the no commission wholesale rate arrangement.
Why does this article fail to mention the 10%+ level premium increases also announced?
Agree with you Skeptic. Very nice of them considering they just put their premiums up. What short memories we have about who the main supporters of these changes actually were.
I can hear Geoff Summerhayes laughing as he rides his white horse into the sunset.
I know we advisers have to get over this FSC betrayal on LIF but sorry Asteron the IFA’s are still feeling the knife you stuck into our backs. You won’t be on my product recommended list again.
Suncorp (along with TAL) has also been leading the charge on direct sales of junk insurance. The way of the future under LIF. One assumes Geoff will get a nice “success bonus” for what he has delivered.
Clearly Mr Vilo has very little concept of what it’s like to be an IFA.
Many years ago when his Company took over Oceanic Life, the first thing they did was outrageously increase the premiums above their own from a previous competitor they now owned.
It guaranteed that no client wanted to stay there.
Since I have also had the poor experience of this company holding one of my clients to ransom for 6 months before agreeing to pay a legitimate claim, there is no way I’d ever give this company the time of day.
Comments are closed.