{"id":28402,"date":"2015-01-13T15:00:52","date_gmt":"2015-01-13T04:00:52","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=28402"},"modified":"2015-01-21T06:53:02","modified_gmt":"2015-01-20T19:53:02","slug":"lapse-rates-continue-to-rise","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2015\/01\/13\/lapse-rates-continue-to-rise\/","title":{"rendered":"Lapse Rates Continue to Rise"},"content":{"rendered":"<p>Life insurance lapse rates continued to rise in the 12 months to 30 June 2014, the Australian Prudential Regulation Authority has reported.<\/p>\n<p><!--more-->Issuing its latest report on life insurance industry performance, the regulator observed that lapse rates for individual risk business have risen over a number of years, and are significantly higher than those which prevailed several years ago. APRA said there was no sign of any reversal of this trend during the 2013\/14 Financial Year.<\/p>\n<p>This increase in lapse rates, combined with deteriorating claims experience, has contributed to another period of profit downturn, as evidenced in the graph below:<\/p>\n<p><a href=\"https:\/\/riskinfo.com.au\/news\/files\/2015\/01\/APRA.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-28405\" alt=\"APRA\" src=\"https:\/\/riskinfo.com.au\/news\/files\/2015\/01\/APRA.png\" width=\"600\" height=\"422\" srcset=\"https:\/\/riskinfo.com.au\/news\/files\/2015\/01\/APRA.png 600w, https:\/\/riskinfo.com.au\/news\/files\/2015\/01\/APRA-300x211.png 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/a><\/p>\n<p>According to APRA, the worsening lapse experience has been attributed to a number of factors, including:<\/p>\n<ul>\n<li>A declining need for risk insurance by ageing \u2018baby boomers\u2019<\/li>\n<li>Stronger competition in the market<\/li>\n<li>Pressure on household budgets leading to some pruning of discretionary expenditure<\/li>\n<li>The longer-term impact of premium rates that automatically increase each year with age<\/li>\n<\/ul>\n<p>\u2018It is also possible that consumers are recognising that the life insurance cover they hold may no longer meet their changing needs, and that product \u2018churn\u2019 by financial advisers in light of the attraction of very high up-front commission rates for new business has contributed to lapse rates,\u2019 APRA said in its report.<\/p>\n<h6>&#8230; \u2018churn\u2019 by financial advisers &#8230; has contributed to lapse rates<\/h6>\n<p>While the cost of a slow weakening in business and risk management practices over a number of years has crystalised into substantial declines in the performance of risk insurance business, APRA said the industry was well placed to work through the current challenges. But the regulator noted it will take a few years before it is clear that industry actions have achieved sustainable premiums and profits.<\/p>\n<p>In the interim, APRA said it had stepped up its supervisory intensity over the past 12 to 18 months:<\/p>\n<p>\u2018APRA supervisors have closely monitored developments and taken steps to highlight to boards and management the poor business and risk management practices that have contributed to the current situation. Life insurers have also been urged to analyse claims trends so as to identify and respond to the causes of rising adverse claims. APRA strongly supports the use of industry wide claims studies to this end. It is evident to APRA that the quality of data held by life insurers is mixed, and that a lack of sufficiently detailed, accurate and timely data impedes appropriate analysis in many cases.\u2019<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Life insurance lapse rates continued to rise in the 12 months to 30 June 2014, the Australian Prudential Regulation Authority has reported.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,8],"tags":[],"class_list":["post-28402","post","type-post","status-publish","format-standard","category-company-news","category-compliance-regulation"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/28402","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=28402"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/28402\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=28402"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=28402"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=28402"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}