Principle of Level Premiums Strong, But Commitment Weak

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Should your advice practice be writing a higher proportion of level premium life insurance business?
  • Yes (59%)
  • No (35%)
  • Not sure (6%)

Mixed messages dominate our latest poll results to the extent that while most advisers say they should write more level premium life insurance policies, their commitment to delivering this outcome seems tempered by disillusionment in some quarters with the approach taken by some insurers to managing their level premium books of business.

As we go to print, six in ten advisers participating in our poll believe their practice should be writing a higher proportion of level premium life insurance contracts. 35% think they have the proportions right, while 5% are unsure.

On the surface, this result indicates level premium business levels may well increase, based on sentiment. The comments we’ve received, however, suggest a level of frustration amongst the adviser community, some of whom appear to have lost faith in the system being able to deliver what they believe to be genuinely level premium product outcomes.

Issues include:

  • CPI linking on many level premium books of business means level premiums still rise every year
  • The anecdotal rise in the frequency of life companies increasing base premiums across the board for inforce series of level premium business
  • A disconnect between price increases for level premium books compared with similar books of stepped premium business, where previously the increases across stepped and level retained their relative pricing differences

While this poll set out to gauge the appetite in advisers to write more level premium-style business following the recent announcement by AIA Australia (see: AIA Australia Rolls Out Level Term Premiums), the message appears to be that while the appetite is there, advisers lack confidence in the industry, in general, being able to deliver what they believe to be genuine level premium solutions for their clients.

We also said we’d compare this current poll result with that of an almost identical poll question from 2013. See the table below for the 2013 outcome, and let us know what you think this means because we’re not sure. Also note that more than double the number of advisers has voted in this poll compared with four years ago, suggesting that while the results are almost identical, there appears to be more interest in this issue in the current life insurance industry environment…

The results from this 2013 Riskinfo poll are almost identical with our current poll on level premium policies...
The results from this 2013 Riskinfo poll are almost identical with our current poll on level premium policies…


2 COMMENTS

  1. In order for advisers to be willing participants around the promotion of level premiums, there needs to be consistency from the Life Companies to honour their claim of “level”.

    It creates doubt in the minds of advisers and clients when level premiums are hit with rises and it smacks of opportunism that betrays the trust people have in Life Companies.

    The simple option of increasing premiums to offset lapses and claims, does not improve the bottom line in the long term, it causes resistance from Australians to retain or buy Life products.

    It already takes many years before clients attain any savings by entrusting the Life Company to do the right thing, so it becomes important for the Life Company to reciprocate that trust and keep to a commitment of maintaining the level premiums,

  2. It’s always about what is best for the client. Sometimes it is level, sometimes it is stepped, or even hybrid. Horses for course.

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