Zurich Financial Services Australia has rolled out a range of new Income Protection products while reducing new business premium rates for Term and TPD cover by 6%.
The insurer said the moves were designed to help advisers position themselves for the introduction of the LIF in mid-2016 and include recent news that some premiums would be frozen from that time.
Zurich, Life and Investments General Manager, Philip Kewin said that from 21 December 2015 Zurich would simplify its bundling and loyalty discounts and would ‘enable advisers to access the most competitive rates all the time’ across all products, tying this shift into the Term and TPD premium reduction.
“As well as being easier to understand, this new proposition allows us to deliver increased value for customers, and is reflected in Term & TPD new business rates that are 6% lower than our current rates for lives under age 55,” Kewin said.
“The changes we have made reflect a move towards simplifying our product range, pricing and execution to benefit advisers and their customers. We feel this sentiment has been lost in much of the recent industry dialogue.”
“The retail income protection market has faced many challenges in recent years, with rapidly deteriorating claims experience being reflected in a seemingly constant cycle of rate increases,” he said.
“With the launch of our new Income Protector range we hope to break this cycle with a design that focuses more on the core benefits of income protection and pricing which is more in line with the latest claims trends.
But Phil, why don’t you tell the whole story ?
You’ve reduced adviser commissions and client loyalty discounts to accommodate the 6.0% decrease in your Life and TPD contracts.
You’ve increased the cost on current IP contracts @ December 21 2015 by 12.5% and together with rate for age increases will amount to a 20.0% increase on existing contracts.
Are you anticipating an exodus out of your old IP contracts into the the new ones. Advisers should consider that at their peril.
You will cease to accept applications on current contracts in December to accommodate your new range of IP insurance.
I’m sure the advisers who have supported you for a number of years can’t wait to see the comparison between the old policy wording and the new one offered. I suspect that there will be a downgrading of the policy wording and that will kill the level of conviction for any adviser who offers advice, to recommend your contracts.
Like many life companies, Zurich have grab the opportunity to increase their rates before the June 2016 LIF changes at the expense of clients and advisers alike.
Can someone inform Kelly O’Dwyer to recognise the kind of climate she’s now helped create
You hit the nail on the head Alleycat.
What about the loyalty discounts of up to approx 10% removed from Death, TPD, Trauma and IP policies where clients have multiple policies?
Is the 6% discount on Death & TPD going to be passed back to existing policies? No of course not because who cares about them when bonuses are based on New Business.
So if a client takes out 3 new policies Death & TPD + Trauma + IP, then the discounts they gain are less than those that they lose. Great idea not. Lets reward the one policy purchaser and reduce the benefit to the loyal client who takes out 2 or more policies with Zurich. While we are at it lets throw in some premium increases. Another ongoing shaft to the risk adviser and their clients.
I know Zurich will say the Death & TPD rates are cheaper up to age 55 and will rate a bit better regarding premiums on research now but your long term clients don’t get to access those rates do they!
Loyalty has become a one way street with insurance companies! Thanks for nothing FSC.
Go alleycat. Did he mention the reduction in Level commissions to further stop those greedy advisers? The real prices hikes to the poor sods stuck in an old product are a true indicator of the real game, and as you say we cant wait to see the downgrading of the policy wording for the benefit of all customers in the new product. Way to LIF, or (less insured futures), as I like to call it.
@ The naked adviser,
The sad part is, their current IP contract is still the best in the market place provided you can deal with their underwriters.
The problem is, they don’t want to keep that business and they will make sure clients will not be able to afford to pay for it.
I unfortunately lost patience with them and coupled with their mediocre administration, we parted company.
There would need to be wholesale management changes, otherwise it’s just like dealing with a 2 week old fish.
You have to wonder where Kelly O’Dwyer is, while all this is going around.
She’s supposed to care about the client’s best interests and the survival of small business.
It all seems like a lot of froth and bubble, with very little substance underneath.
In agreement with Allycat and everyone else. The real article is that Zurich will close off its existing IP products and raise premiums for clients to the extent that they will not be able to afford it and leave. Then they will release a dumbed down IP product with less chance of paying claims but they will reduce some Life and TPD premiums by 6% by cutting adviser commission by 6% and cutting the clients loyalty bonuses.
Since the insurance companies got together this year under the price fixing mafia consortium called the FSC they have all made the situation worse for clients and advisers to increase profits but they are still trying to put a positive spin on it. Do they think everyone is completely stupid?
@Reality Check,
In response to your last question, the obvious answer is …..YES !!!
Agreed
The story of life (insurance) – Apparently for years life insurance advisers have received around 120% of every $1 of premium as commission. So to dumb it down, for every $1000 premium advisers received $1200. When the insurance company assessed these applications they also incurred costs like getting medical evidence and the like. Then after 13 months the adviser would often (not always) find another life insurance company and re write the insurance. Of course the new product was largely the same but the price was slightly cheaper so it made sense to the client. Unfortunately life insurance companies started losing money because whether you like it or not, an increasingly large proportion of the business started lapsing between year 2 and 5. Insurance companies need to actually recoup the costs and ultimately make a profit around year 7 but unfortunately they created an unsustainable environment. Yes, it is their fault. The government intervened and said to the insurers, “get your house in order otherwise we will do it for you.” So the insurers started doing this and then a bunch of traditional (not necessarily old) life advisers who have been living on high up fronts forever (although they will deny this vehemently) realised they had a voice on social media so they started trolling articles like this. Fortunately these individuals are a noisy minority and once they can no longer support themselves on their trail commission they will decide to leave the industry. In doing so it will lift the professionalism of the industry and customers in the long term will be the beneficiary. True or false?
Do you run your own business? Doesnt sound like you do….
FALSE, FALSE, FALSE. The “story” you quote is based on extreme examples, not the remuneration and behaviour of most advisers most of the time. Adviser professionalism will be increased anyway through FOFA. We have only just started on that path so it is wrong to suggest the current (post FOFA) system isn’t working, or that even more regulation is needed. The main outcome of LIF is that clients will be unable or unwilling to pay the true cost of professional advice if they have to pay a separate fee in full upfront. Instead they will end up with no insurance or junk insurance. Customers in the long term will not be beneficiaries, they will be massive losers.
LIF is all about removing professional advice from life & disability insurance, so that insurers can sell more high profit junk insurance via advertising. Advisers and their representatives need to educate clients on the dangers of junk insurance.
Some people have suggested that if clients are unwilling to pay a full advice fee upfront, then the adviser mustn’t be offering sufficient value. Part of this problem is that clients don’t understand what the downside of not getting advice is. They think that the default insurance in their super, or insurance advertised on TV with “no medicals” is perfectly OK, so why waste time and money on advice? We need to educate the public that junk insurance like this has a lower chance of paying claims, and won’t cover them at all for many of things they expect it will. Only once consumers understand the dangers, will they be prepared to pay someone to protect them from those dangers.
Come on advisers and adviser associations, start spreading the (bad) news about junk insurance.
so which Govt department do you work for? Or are you a FSC troll?
@ LifePunk
Sport, your delusional.
You obviously haven’t been in the Life insurance industry very long,…. so ignorance is bliss.
Ever since Noah was asked by God to build an Ark, Life companies have marketed themselves on the following basis. Your life cover for a particular sum insured would be offered at a particular premium, then roughly 3 years later, your twin brother comes along and applies to the same life company for the same sum insured, but at a 30.0% – 40.0% discount to yours.
Here’s why the business lapsed in many cases.
I’m your adviser and you say to me ” for my loyalty why does my twin brother pay 30.0% less for the same contract at the same age for the same amount of cover?”
My options are leave you there, albeit temporarily, because if I don’t put you somewhere else, another adviser will.
That’s one scenario !
The next scenario is, life companies have had a number of legacy products that offer better terms that are superior to the ones currently being sold.
But they wanted to get rid of them, so they increased the premiums outrageously on those legacy products.
I can name 3 current life companies that increased their premiums over a 1 -2 year period by 40.0%, 53.0% and 20.0% to drive the clients into a downgraded inferior policy.
In the Group Life area, one life company this year has increased their premiums by 85.0%
Advisers have had no option because despite what you think the majority of advisers do act in the client’s best interests.
Yes, there’s the odd “churner ” who has done what you say but they are in such a minority, that whole industry has been belted over the head as a result.
The answer was to name and shame them, including the receiving life company and prosecute if they couldn’t show due cause.
Your commission figure is erroneous, because the majority of life companies pay around 100.0% commission but that figure includes GST and does not include Stamp Duty or Administration fees.
You sound like you’re wrapped in the warm bosom of a life company.
If that’s the case then, self interest is how this hold debate has been hijacked by those who have the most to gain,…..none being by the adviser or the client.
Alleycat you make some sound points of which I do not disagree. The twin brother issue is real as is the legacy. I agree that life insurers need to make sure that the loyal pay the same as the new client. Who will be the first to truly crack that nut? The challenge as you know is the product guarantees built in. There still remains legacy products with lifetime benefit periods in IP (what were we thinking?) as well as trauma definitions that pay for the world’s smallest heart attack (not sustainable). These issues are now coming home to roost with long term genuine claimants (quite rightly) receiving an IP annuity for life for example. Good luck to to them as that’s what they bought I say, however the issue remains the profitability of the portfolio. What is the solution? Building products that remove guarantees that enable product development with lack of foresight to be changed so the premiums stay down and the customer benefits in the long run. Unfortunately the researchers don’t rank (or at least rate) products without guarantees so would you recommend these in the best interests of your client? Probably not. The opportunity for people like us is to get your ideas on the table. You’ve clearly been around a while so lobby your life insurers, Associations peer groups etc. Let’s start to make these conversations more solutions oriented or at the very least start to give advisers and other nameless contributors ie you and I, an outlet for for constructive, productive commentary and some context for all of us to think about. Maybe that’s just drawing too long a bow but worth a shot.
PS I concede that up front is no longer 120% for every life office, so let’s agree that it’s on average, around about 110% – at lest until July.
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