In what could be a good sign for the industry, individual lump sum new business increased by 1.6 percent to $254 million during the December quarter, according to DEXX&R’s Life Analysis Report for the year ending December 2020.
The research firm says in a statement that this is $4 million more than the $250 million recorded in September 2020 quarter. December 2020 new business was up by 0.7 percent when compared to the $252 million in lump sum new business written in the December 2019 quarter.
However, the report also found that individual risk lump sum new business was down by 5.2 percent over the year to December 2020.
“Notwithstanding the rebound in sales in the December quarter of lump sum new business, sales for the year ending December 2020 were down 5.2 percent to $954 million from the $1.0 billion recorded in the year to December 2019.
“This is the lowest level of new sales recorded in the past five years,” the report says.
DEXX&R’s Managing Director Mark Kachor told Riskinfo the recovery in the December 2020 quarter ”…is a good sign that new business, after a significant decline, may be again showing signs of increasing albeit from a low base”.
He said there was a long way to go before the industry is back where it might have been had it not had the pandemic, LIF and the dealer group disruption.
As for the outlook, Kachor says March is always a slow quarter and was pre-pandemic in 2020 “…so expect sales for March 2021 to be down and [the] June quarter will be the real test of whether new business is really beginning to recover”.
The report says that the continued decrease in business (for the December 2020 year) “reflects the impact of the Covid lockdown from March 2020 and ongoing disruption in the advice distribution channel including the restructuring and transfer of ownership of retail bank owned dealer groups and a fall in the number of life risk advisers.”
Individual Lump Sum Discontinuances
DEXX&R says that the Individual Lump Sum attrition rate peaked in December 2012 at 15.8 percent. The Attrition Rate fell further to 10.1 percent in December 2020, down from 13.6 percent in December 2019.
The company notes that its Attrition Rate calculates discontinuances as a percentage of in-force premiums and that the formula “…provides a stable and consistent measure of discontinuances by premium value over time”.
Disability Income
Meanwhile, Disability Income new business in the December 2020 quarter was $109 million, up 9.0 percent from the $100 million recorded in the September 2020 quarter. “December 2020 quarter sales were up 3.8 percent when compared to the $105 million recorded in the December 2019 quarter.”
However, it notes that Disability Income new business decreased by 9.3 percent to $405 million over the year to December 2020, down from the $446 million recorded in the 12 months to December 2019.
The report says this is the lowest level of new business recorded since 2011 – a nine year low.
“This fall is attributed to the impact of the Covid lockdown and disruption in advice channels and the APRA mandated product intervention effective from the end of March 2020.”
Disability Income Discontinuances
The report also notes that the DEXX&R Attrition Rate for Disability Income business decreased for the seventh consecutive year of decreases, down from the December 2012 high of 15.8 percent to 9.1 percent in December 2020. It says Disability Income Attrition Rates are now at a record 10 year low.
“This low level of discontinuances indicates that clients are retaining their existing Disability Income policies at a higher rate than has been the case over the past 10 years,” the report says.
