{"id":55538,"date":"2021-04-27T09:33:36","date_gmt":"2021-04-26T23:33:36","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=55538"},"modified":"2024-10-30T08:44:49","modified_gmt":"2024-10-29T22:44:49","slug":"the-challenge-of-income-replacement-ratios","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2021\/04\/27\/the-challenge-of-income-replacement-ratios\/","title":{"rendered":"The Challenge of Income Replacement Ratios"},"content":{"rendered":"<div id=\"polls-253\" class=\"wp-polls\">\n\t\t<div class=\"pollHeader\"><strong>Would you recommend a product with a 50% replacement ratio if it means more affordable IP premiums?<\/strong><\/div><div id=\"polls-253-ans\" class=\"wp-polls-ans\"><ul class=\"wp-polls-ul\">\n\t\t<li>No <small>(45%)<\/small><div class=\"pollbar\" style=\"width: 45%\" title=\"No (45% | 82 Votes)\"><\/div><\/li>\n\t\t<li>Yes <small>(36%)<\/small><div class=\"pollbar\" style=\"width: 36%\" title=\"Yes (36% | 66 Votes)\"><\/div><\/li>\n\t\t<li>Not sure <small>(18%)<\/small><div class=\"pollbar\" style=\"width: 18%\" title=\"Not sure (18% | 33 Votes)\"><\/div><\/li>\n\t\t<\/ul><div style=\"text-align: center\"><\/div><\/div>\n\t\t<input type=\"hidden\" id=\"poll_253_nonce\" name=\"wp-polls-nonce\" value=\"5af3a07567\" \/>\n<\/div>\n\n<p>As the financial advice sector awaits the roll out of the new generation of income protection insurance products in the second half of 2021, we&#8217;re keen to learn your views on some of the key changes which may be coming your way.<\/p>\n<p>Based on comments made at last weeks&#8217; <a href=\"https:\/\/riskinfo.com.au\/news\/files\/2021\/04\/210421-2021-FSC-Life-Insurance-Summit.pdf\" target=\"_blank\" rel=\"noopener\">2021 FSC Life Insurance Summit<\/a> in Sydney, it seems that most insurers are yet to finalise their new IP offers, where the take-up rate of these yet-to-be-launched products will be a critical factor in determining whether individual retail IP products will remain a future part of the Australian life insurance landscape.<\/p>\n<p>One of the key challenges facing the product manufacturers is how to manage APRA&#8217;s effective dictate that all insurers must avoid offering individual disability income insurance (IDII) policies with fixed terms and conditions of more than five years (see: <a href=\"https:\/\/riskinfo.com.au\/news\/2020\/10\/01\/apra-resumes-intervention-to-stem-insurers-idii-losses\/\" target=\"_blank\" rel=\"noopener\">APRA Cracks Whip&#8230;<\/a>).<\/p>\n<p>As the insurers grapple with the complexities associated with what happens after five years, another of the key challenges the industry faces &#8211; and the topic of this poll &#8211; is whether insurers will continue to be able to offer to replace 75% of a claimant&#8217;s income and remain sustainable.<\/p>\n<blockquote><p>This is a huge consideration for the industry, as product manufacturers continue to seek a competitive advantage<\/p><\/blockquote>\n<p>This is a huge consideration for the industry, as product manufacturers continue to seek a competitive advantage over their rivals &#8230;and replacement ratios is one area where the sector may see different offers emerging.<\/p>\n<p>So, the challenge for insurers &#8211; at least to an extent &#8211; is to find a way to balance the two often-competing but critical factors of sustainability and competitive advantage.<\/p>\n<p>The idea behind reducing an income replacement ratio from 75% to (say) 50% is that such a reduction delivers an outcome which, while less attractive to the claimant, is at least more affordable for more people.<\/p>\n<p>But this is where the balancing act comes into play: At what point would a reduced income replacement ratio become uncommercial? Would 50% still work? Or will your client need more than 50% as a minimum? Can you envisage what your conversations will be like with your current and future clients around this critical question?<\/p>\n<p>There&#8217;s no right or wrong answer to this question, so please let us know what you think and we&#8217;ll report back to you next week&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As the financial advice sector awaits the roll out of the new generation of income protection insurance products in the second half of 2021, we&#8217;re keen to learn your views on some of the key changes which may be coming your way. Based on comments made at last weeks&#8217; 2021 FSC Life Insurance Summit in [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":55544,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,49,4],"tags":[],"class_list":["post-55538","post","type-post","status-publish","format-standard","has-post-thumbnail","category-compliance-regulation","category-polls","category-products"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/55538","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=55538"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/55538\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/55544"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=55538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=55538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=55538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}