We wish it wasn’t, but our report on the continuing decline in genuine life insurance new business is clearly the Riskinfo Story of the Week…
Individual risk new business sales continued their downward spiral in 2022, according to latest data released by Plan For Life.
While overall life insurance inflows increased by 2.5% in the year ending December 2022, new premium sales for individual lump sum policies declined by 5.3% compared to 2021, while individual income protection insurance new business sales were down by 4.1%.
Drilling further into the data released by PFL over time reveals ‘genuine’ or actual new business sales are making up an even smaller proportion of the overall new business numbers reported.
…actual new business fell by a further $67m in 2022
According to PFL, of the combined $1.7bn in individual risk lump sum and IP sales reported for 2022, $1.3bn of this came from in-force policy increases (eg stepped premium and CPI increases), while only $400m was generated by actual new business sales. This compares with 2021 numbers, where combined individual lump sum and IP sales were almost identical at $1.32bn, but where genuine new policy sales contributed $467m to this number, meaning actual new business fell by a further $67m in 2022.
While individual new business sales continued to head south, overall inflows were up by 2.5%, with PFL noting that as long as combined new annual premiums (including age-based and CPI increases) are larger than total lapses and discontinuances, there will usually emerge a steady increase to overall inflows/inforce business.
So let’s see, what happens when the lack of inflow of genuine fully underwritten new business begins to impact the capacity of life insurers to “dabble” in the gamble that is group life cover for ISN funds. Where will the trustees go for the compulsory default insurance offer? The Bahamas?
Someone has to this show this item to firstly Minister Jones and then Treasury and explain what it means to the future of default insurance in industry superfunds if genuine new business continues its spiraling fall down the tube of total disaster. And some of those generous contributions to Labor’s election funding may well be at risk
But still, we hear nothing from the CEOs of these flailing life insurers. No public statements requesting the reinstatement of life risk commissions. No honest statements about having to reconsider providing group cover to industry funds.
What an abject failure of leadership we have at this moment in our life insurance industry.
Risk advisers need to be rewarded appropriately for their advice and implementation activities, and be faced with less compliance rubbish so that we can get the life insurance industry back to where it was, before the Coalition idiots stuffed it
Perhaps the most disturbing part of this report from Plan for Life is the last paragraph. Essentially what it says is that the life insurance industry is hanging on by its fingernails on a plate glass window because insurers, particularly those with recently purchased books, are gouging premiums to make up for the loss of new business which has been compounded by LIF, overreaching compliance, FASEA (Standard 5), the Apra induced 2021 changes to income protection, and lack of the “Pathway”.
That “solution” of hammering legacy policyholders can only go on for so much longer, because essentially clients are going to be keep asking questions and making “unadvised ” decisions, often without access to a risk specialist adviser (because the adviser is no longer in the industry) to cancel their unaffordable cover. Once that occurs, we are all on our own. Those “rivers of gold” of the ever increasing retail premiums will no longer exist.
So I guess my question is this: does the Minister and Treasury really understand what they have on their hands? And who’s going to tell them – the FAAA. Not on past records of glorious under-achievement when it comes to policy issues relating to life insurance!
Seems like the only adviser representative body in effective contact with government is the AIOFP
But, but, but, but ,but . . . TAL is doing courses to help with FARCE-IA exams and such and Zurich is doing pro-bono work. See, the life companies are coming to the aid of advisers, YAY!! Oh, I agree about the AIOFP but I think, sadly, they lack clout enough and it is a bit late now anyway – too many good breadwinner riskies gone and the tide won’t relent.
The obvious issue is that 400 Million dollars in genuine New Business, is not a sustainable figure and stepped premiums, CPI, plus additional increases, combined with rising interest rates and a large cohort of the premium dollars coming from the over 50 age bracket that will be cancelling their policies over the next 5 years, is going to further exacerbate what is a growing problem that unless fixed soon, will only get much worse.
The solution is easy, quick to implement and if the people in positions to make the changes, can finally start listening, then doing the right thing, there will be a positive turnaround.
In all my rants I hadn’t considered the over 50s cancelling en masse within the next 5 years. Good lord, it is even worse than I thought, Jeremy. That is a monumental showstopper right there. I’m tempted to say nothing more than they (life execs) deserve but then I think of the disadvantaged clients who won’t have the cover the need and really want. True no-win situation.
It seems quite simple. The insurance companies will starve to death while they underpay their advisers. Eventually the logic of this statement will be accepted, the only question is when. Preferably not posthumously.
LOL . . . and the life company ‘execs’ sit and wonder and act genuinely surprised about all this. Absurd, what did they think would happen giving advisers a 40% pay cut, a TWO year claw-back period and 40%++ rise in client risk premiums? Oh, they’ll say they didn’t do it – politicians did. BS.
Life company elites sat and did nothing when they should have been fighting for advisers and client best interest. They should have and could have pushed back but they were STUPID enough and GREEDY enough to think it would work to the upside for their interests. NOT adviser OR client best interest.
Well, how wrong can you be? – about as wrong as those greedy parasites! At least now the piper is being paid. Sadly for clients it simply will never improve and I hold fears for the statutory funds that pay claims – they can’t survive forever with dwindling income. This was all mind-numbingly simple to see and avoidable but the so called ‘execs’ at these companies couldn’t wrap their heads around it even as advisers were warning them, daily, this would happen. They go and act as if nobody told them this this outcome was inevitable – TONE DEAF. (as if they needed to be told in their position, surely they can use a calculator?!).
You couldn’t make this stuff up – true Laurel & Hardy idiocy writ large on the life company scoreboard of client detriment and adviser bashing. Rant over. Feeling much better now 😉
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