New research has revealed a meaningful reduction in replacement policy activity across both lump sum and income protection insurance products.
…replacement activity is occurring at lower levels than in the past
In what may prove to be an early indicator of a new trend, research firm, DEXX&R’s Life Analysis Report for the year ending December 2018 reports both a decline in lump sum new business rates for the period as well as a decrease in attrition rates.
Importantly, the researcher notes, “In the past a decline in new business has been accompanied by an increase in attrition rates. The continued decrease in attrition rates indicates that life insurance policies are staying in-force longer and replacement activity is occurring at lower levels than in the past.”
DEXX&R says this same trend has also been revealed in its analysis of disability income new business for the year ended December 2018. It says the attrition rate for disability income business has decreased for the fifth consecutive year, placing the rate at its lowest level in
ten years, indicating both a substantial improvement in the number of policies remaining in force and a decrease in replacement activity.
Increasing Life Company Reliance on Advisers
Life Companies are now becoming increasingly reliant on sales made by aligned and non-aligned advisers
In other news stemming from DEXX&Rs December 2018 reporting, the researcher has linked what it refers to as a large fall in risk sales in the twelve months to December 2018 with several of the major retail banks suspending or closing down direct sales of life insurance products. It says:
“Life Companies are now becoming increasingly reliant on sales made by aligned and non-aligned advisers providing personal advice for
future lump sum new business growth.”