News that average IP insurance premiums have experienced a hefty increase over the last five years generated strong reader interest this week…
Average retail income protection insurance premiums have experienced more than a 50% increase over the last five years, according to Adviser Ratings’ 2024 Australian Financial Advice Landscape report.
In examining premium change by policy type over time the report states that IP cover rose by 52%, noting that in recent years the industry has faced significant challenges in managing mental health pricing “…particularly as it deals with an exposed back book.”
IP is also the priciest insurance for consumers so the impact has been more substantially felt in terms of the household budget, it says.
Adviser Ratings says that TPD, accident-only and trauma have seen increases of 59%, 26% and 30%, respectively.
“Death insurance, the biggest contributor to an insurer’s profitability, has seen an increase of 38% over the corresponding period.”
Adviser Ratings notes that price stability is crucial for both consumers and advisers, as it ensures predictability and confidence in the life insurance market. (Also see: Mapping United Path to $500 Million Risk New Business).
“A stable pricing environment allows consumers to budget effectively for their insurance needs and assures advisers that the products they recommend will remain affordable and competitive.”
The research firm says “…a deceleration in premium increase rates will indicate market health improvement, reflecting better risk management and a shift towards a more sustainable, customer-centric insurance landscape.”
Click here to see the full report.
The other correlated area of concern, is that more than half of the premiums paid to Insurers from loyal advised clients, are from the over 50's demographic who WILL be cancelling their policies within 5 years due to them no longer needing the cover, or because they can no longer justify the sky high premiums which as a percentage, is much higher in actual dollars being taken from their accounts.
The Life Insurers need to take this as a exponential threat, as the traditional days of lots of TRUE New Business to offset lapsing policies, has not been seen in the last few years due to the "improvements" the Government introduced that saw Advisers being forced away from providing risk advice due to excessive costs and Regulatory / Education mandates which led to a collapse of risk advisers and New Business.
People will no longer sit back and accept continual premium increases with rising costs of living, so the Insurers, Associations and the Government need to get their acts together, or we will see further declines and rising premiums which is nothing more than a slow death spiral.
The solution has always been in plain sight and yet today, none of these entities can see it, or are turning a blind eye.
Once the other eye goes blind, then they will truly be the blind leading the blind.
Jeremy, let's hope the old adage works here, that "the cure for higher prices is higher prices". Once these 'over 50' policies you mention do start to expire or get cancelled, without the TRUE new business to replace it, let's hope the insurers get the wake-up face slap they deserve. Then, once the execs and actuaries of these companies stand on the edge of the abyss, they 'may' return to some semblance of normality with lower premiums and proper quality contractual definitions rather than the current IP vapourware. For the benefit of the client I hope I am wrong BUT, personally, I hold no hope that this will be the case. Hope nobody out there is holding their breath . . .
If you quote average premiums you need to normalise for age (insured population is getting older) and sum insured levels (growing due to inflation if nothing else).
Seems like dodgy analysis and/or dodgy conclusion.
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