Life insurers who are blaming high lapse and claim rates for poor profits need to focus on delivering competitive pricing and better products to consumers, according to Experien Insurance Services chief executive Clive Levinthal.
The former head of wealth, life insurance products and underwriting at ClearView Wealth said competitiveness in the industry had fallen dramatically over the years, with very little investment in the Australian market in terms of claims management systems and claims technology.
Speaking at the Actuaries Institute Summit, Levinthal said the profit margins on legacy portfolios "are almost more than double the profit margins on newer business" so there is pressure for manufacturers to keep their profits steady, let alone grow them.
"This high price in premiums and low growth in profitability will clash soon," he said.
"It's already clashing — we're starting to see some clients facing 58 per cent price rises on their renewals."
He said a lot of the inefficiencies in the industry stemmed from the multitude of premium rates available across the thousands of pricing combinations based on client demographics. In some cases, there can be a 40 per cent difference between prices.
"Relationship management is a skill that many insurers are losing over time — a lot of people want to deal with insurers with stable management that will be there when a claim from a policy they're selling today is there," Levinthal said.
