MLC Life Reports Majority of Lapses Driven by Consumer Changes


MLC Life Insurance has flagged customer initiated changes as the key factors in the majority of lapsed policies held by the insurer.

MLC Life Insurance Chief Executive Officer, David Hackett.
MLC Life Insurance Chief Executive Officer, David Hackett.

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.


  1. Funny that, once the legislation is in place to reduce our income and the FSC vilifying advisers as the cause of churning, MLC come out and admit what they always knew

  2. No surprises from the insurance companies that now they have got what they wanted that the truth comes out. Blind Freddy could see that this was always a stitch up of advisers to benefit the insurance companies short and long term. Disgraceful behaviour from insurance companies that advisers have loyally supported over decades.

  3. What joke.
    Most of MLC’s policies are either too dear compared to others in the market place or their contracts are inferior to others, especially the older contracts.

    Perhaps someone is educating their former clients, that’s the case.

    As for others, well, perhaps increasing Group Life rates by 85.0% in 1 year had something to do with a particular company’s lapses/cancellations.

    Perhaps increasing IP rates by 53.0% over a 2 year period by another company (which company you might ask ?) had something to do with long term clients requesting a move to another insurer.

    This was not motivated by a poor claims record but an excuse to get rid of long term legacy products that had a potential liability that the insurance company were not prepared to take after 15 years of profit taking and, decided to not so subtly, price themselves out of the market to get rid of those policies.

    Perhaps the increase of 30.0% on level IP rates by another insurer had something to do with clients wanting to change insurance providers.

    Perhaps the increase in their IP contracts by another by an initial increase of 12.5% plus a rate for age increase (viz 8%-10%) was more than some existing clients were prepared to stomach.
    Add to that, the replacement of that existing policy together with a premium increase of say 20.0% with an inferior contract now available would not engender client loyalty,……. nor should it.
    The Life insurance industry has a lot to answer for,… but don’t expect any to be forth coming.
    When you have mediocre management at the top coupled with self interest, the best you can hope for is,…. mediocrity all the way down.

    Perhaps the long held view by insurers in the past was OK to charge an existing client their current premium rates, whilst 4 years later, the client’s twin brother was offered the same level of insurance but at a 30.0% discount by the same company.
    You won’t hear any government or PJC challenge or be remotely interested in these facts

    So, who am I to question the morality of the Life insurance industry. .

    • There is another elephant in the room. At least one old large life office is busily packaging up a book of poorly underwritten and poorly costed IP business it purchased at a “bargain “price some years ago in preparation to be sold to a RE-INSURER. Same tactics – jam up premiums by outrageous factors so that legacy policy holders abandon ship. Gets that portfolio off the books if you are contemplating a sale or takeover
      And Mr PJC Chairman, those policies will be recorded as adviser driven lapses just in time to feed into ASICs review in a few years

  4. It’s like not being able to wake up from a bad dream !! If this was happening in the nursing industry or any other for that matter there would be union marchs in George st but no !
    Why? Because the banks run this country not the Government ! Whatever they want they find a way to get it by” hook” or by “crook”
    Look at not only this truth we have all known but this unbelievable APL listing that has just been presented
    Who does that assist the most
    Terrible is a modest assumption

  5. So now an FSC member is admitting that most lapses come through affordability. This coming after the LIF is passed and the same FSC members convincing government that it was all the dodgy advisers fault through churn and they should be paid less.
    This coming after the same FSC members are on their 3rd round of huge premium hikes in less than two years.
    This is a disgrace. There should be a Royal Commission and it should start with the FSC cartel.

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