Impact of Pandemic on Risk Products ‘Minimal’ Says Research Firm

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The pandemic impact on retail individual risk products is expected to be minimal, according to the latest Market Projections Report released by research firm DEXX&R.

In its just-released report, the research firm predicts a small downturn as a result of premium and benefit suspension options being used by those with incomes impacted by the lockdowns.

“Over the next three years higher levels of discontinuances are expected as the result of higher levels of unemployment,” says the report.

It also says existing pre-Covid-19 issues faced by life insurers are expected to have a greater impact on subdued growth in new and in-force premiums over the next five years.

“These issues include a fall in the number of advisers actively recommending risk products,” says the report.

It says the reason for the drop in financial adviser numbers is due to:

  • The accelerated retirement of experienced risk advisers who do not wish to go through the FASEA process
  • Disruption caused by the exit of major retail banks selling or scaling down their licensed dealer groups
  • The impact of lower initial commission under LIF

The report also looks at disability income products, saying these too have come under pressure with APRA requiring benefits to be downgraded or removed, compounded by a  significant upwards pressure on disability income premiums to return disability income businesses to profit.

However, it expects premium increases on existing business to offset lower growth in new premium inflows, and that in-force retail term life and TPD premiums to grow by 1.5 percent a year from $5.7 billion in December 2019 to $6.6 billion In December 2029.

Other forecasts by the firm include trauma in-force premiums to grow by 1.5 percent a year from $946 million in December 2019 to $1.1 billion In December 2029; and disability income in-force premiums to grow by 2.6 percent a year from $2.8 billion in December 2019 to $3.6 billion In December 2029.