Integrity Life has launched a new lifetime discount offer, a move that it says strongly aligns with the long-term interests of both advisers and consumers.
The offer includes an 8 per cent discount for the lifetime of a policy across its lump sum products (Life, Critical Illness and TPD) which the insurer says is designed to ensure sustainable pricing for its life insurance products.
Commenting on the offer, Integrity Life MD, Chris Powell says, “The financial services Royal Commission highlighted that the customer’s interests must come first, and products must be appropriate to their needs. This simple principle is something that businesses such as ours are seeking to address, and to play a valuable role in the evolution of our industry towards this mindset.
He added: “When thinking about the best way to price our products, we made the deliberate decision to ensure they are all priced individually and sustainably. We believe this transparency in pricing will help advisers build trust and loyalty with their clients.”
The decision to only provide discounts on lump sum products is aligned with regulator and industry concerns about the sustainability of Income Protection (IP).
Powell noted how current discounts, particularly upfront short-term discounts on IP, are unsustainable and contribute to ongoing losses among insurers.
“Because of the importance of IP as a lead component of ‘packages’ it is always tempting to price it as a ‘loss leader’. However, pricing in this way does not align with Integrity’s philosophy of promoting on-going sustainable pricing, nor does it benefit the insurer, the adviser or the customer in the long run,” he explained.
“We trust that our adviser partners will be excited by this new proposition…”
Integrity’s offer of 8 percent off is on the standard premium each year for the life of the policy. The offer is valid for new business quoted and submitted from 15 September 2019 to 31 December 2019. Applications must be inclusive of two or more different covers, with the discount applied to lump sum covers (Life, Critical Illness or TPD) only.
Powell said the insurer worked closely with advisers to develop the new proposition.
“We trust that our adviser partners will be excited by this new proposition and the broader changes it represents for the life insurance industry.”
Dear Mr Powell,
Obviously keen pricing will attract the kind of adviser who thinks the best price will get a client over the line to make a sale.
Unfortunately, this from a historical point of view attracts the wrong client and the wrong adviser, if price is the main issue.
Those kind of clients will always react if the price increases annually, say well above your 8.0% discount.
Even with an 8.0% life time discount, I suspect with fewer and fewer life companies competing in the market place, premiums will continue to rise for one fundamental reason.
The lack of competition and falling revenue growth will force companies to increase their existing risk premiums to cover current and future liabilities..
What happened to the good old days when life companies were differentiated by their product offering and benefit terms, and that includes income protection insurance. ?
I can tell you, life companies today decided unilaterally, to offer inferior contract terms compared to many old legacy products, that now offer less benefits today, and the pricing hasn’t changed all that much.
The unfortunate situation is that offering the same product as everyone else does not guarantee market share, future sales or retention of business because sooner or later your competitors will offer the same.
So what’s the answer to future risk premium generation ?
That’s an easy question to answer.
Offer better contract benefits than anyone else and target market who you want and also target who you don’t want.
Offering a “me too” contract just doesn’t cut it unless you happen to be the last man standing !
Thanks Alleycat,
As always you make a valuable contribution to the debate.
I agree with you that if advisers are to meet their “client’s best interest” obligations then price can only be one factor in making the recommendation. I also agree that over time products have become increasingly similar in the benefits and covers they offer.
So let’s think about what life insurance, as product, sets out to achieve for the client. Unlike its close cousin, general insurance, life insurance is a contract to provide ongoing cover for the life insured for as long as they wish to continue to pay the premium i.e. there is a guarantee of renewal which does not apply to general insurance . There is no capacity to re-assess the cover or the health of the life insured each year. Underwriting takes place once and once only – so when the life insurer approves the application and receives the premium there is a very real possibility of that contract and the basis on which it was underwritten, being an obligation on the life insurer for, perhaps, 40, 50 or more years. Life insurers only get that underwriting opportunity once and must then wear their decision “for life”.
Now if the product is one that involves a commitment for life by the insurer, then it makes sense that the pricing of that product should be provided on the same basis. This means that the pricing needs to be both sustainable for the customer and profitable for the insurer.
While it is true that the market has decided price is the best lever to pull for now, and we have decided that we also need to adjust pricing to stay visible – our offer is not a honeymoon deal and nor was it a hasty decision made to retain market share. You correctly identify that our discount is for the life of the policy – we did this to ensure our mutual customers do not have a great leap in premium once, like so many of the current short-term discounts the discount expires leaving the customer facing “sticker shock on receiving their next renewal notice. Integrity Life want to have insured customers with us for life; and to encourage similar thinking amongst advisers.
Life companies have stringent capital requirements to operate and must be able to demonstrate to APRA that they have adequate capital to meet all liabilities. However, in terms of future price increases, life insurers must respond to increased costs of all types, whether they be administration overheads, reinsurance or increased costs arising from their insurance portfolio which include higher than expected claims losses and lapses, etc. in order to maintain profitability, which then ensures the ongoing viability of the life company.
I am sure you’d agree that in days gone by, income protection (IP) was a different market – there was certainly some elasticity in the premiums and the product was mainly targeted at self-employed people. Cross-subsidisation from lump sum products to IP became the norm as there were big improvements in mortality to offset less profitable products. As you know, income protection has really been unprofitable for almost 20 years and as the industry is aware we have lost over $1 billion on this product alone. Back in the day, there were no rating houses as such – Proplanner and Life Research were just starting, and multi-agency was just emerging. So I’m not sure I agree that the products today are inferior; yes, they are almost homogenous, but the contracts have improved, and consumerism has ensured that poorly designed and sold products, usually sold without advice, get the blowtorch of ‘community standards’ applied. And rightly so.
So pricing really has changed dramatically, regulatory requirements have dramatically increased, technology is driving efficiency and the adviser environment is almost unrecognisable compared to what it used to be.
We believe that product as part of an overall offering designed by and for advisers and their clients is the way forward. While as I mention products have become almost ubiquitous, the next offerings from Integrity will not be so – and we look forward to showing them to you over coming months.
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