MLC Life Insurance has flagged customer initiated changes as the key factors in the majority of lapsed policies held by the insurer.
In a recently published response to a question on notice received from the Parliamentary Joint Committee (PJC) Inquiry into Life Insurance, MLC Life Insurance indicated that 80% of its lapses across its retail insurance book were due to a change in customer needs, affordability of cover and switching to a competitor’s product.
The issue of lapses was raised on a number of occasions at the PJC which sought to determine when a policy was considered to have lapsed, when it was considered to have been churned and how life insurers identified and recorded those events.
The life insurer provided a further breakdown of its lapse statistics stating that 74% of lapsed policies were held by people aged over 50 with the main driver behind lapses being that the cover offered by the policy was no longer required.
“The reason for lapse is important and we are putting in systems and gathering data to get more understanding around that…”
MLC Life Insurance also stated that of the remaining 26% of lapsing members, around 20% were aged between 40 and 50 and the remaining 6% were aged under 40 and for these two groups lapses were more likely to be due to affordability and switching to a competitor product.
Addressing the PJC during its Canberra hearing last month, MLC Life Insurance Chief Executive, David Hackett said that MLC’s experience was not applicable across the wider life insurance sector given its length of time in the market.
“We actually have one of the higher levels of lapse in the industry, but it is a very difficult metric to compare, in that we are a 130‐year‐old life insurance company and we have one of the largest books of insurance,” Hackett said.
He added that MLC Life Insurance has found a high number of lapses are related to people who no longer need the levels of protection they previously required when paying off a mortgage and having dependent children.
“The reason for lapse is important and we are putting in systems and gathering data to get more understanding around that. But I would say that not all insurers are the same,” Hackett said.
“Some are relatively new and the risk profile in the book and the demographic profile of the policyholder are very different. So it is a hard thing to compare,” he said.