Adviser commissions not unsustainable
Australia's life insurance industry needs to innovate and lobby Government to remove stamp duty from policies, not push to slash advisers' commissions, if they have concerns over the sector's sustainability.
LifeInsuranceDirect.com.au chief executive, Russell Cain, said insurers' recent profit announcements provided clear evidence that "they continue to make substantial profits".
Cain noted that AMP reported a 33 per cent rise in statutory net profits in August, while ANZ's statutory profit after tax climbed three per cent to $3.5 billion, as of May 2015, with TAL's premium income jumping 21 per cent, and ClearView posted a four per cent risk in underlying profits for the 2015 fiscal year.
"If life insurers do have a sustainability problem, then the onus should be on them to solve that problem," he said.
"Amongst other things, they could be innovating on product design and lobbying the Government to ensure that things like stamp duty are removed from life insurance to make it more affordable."
In a paper released yesterday, LifeInsuranceDirect.com.au reported that clients were paying "for past decisions made by insurers", who began discounting group policies to win the business of superannuation funds.
The paper was also critical of "stepped premiums", saying the policy increased the likelihood of people abandoning cover as their risk increased.
"According to life insurer, TAL, 91 per cent of current life insurance policies have stepped premiums," it said.
"This means your premium increases as you get older. It makes sense — to the insurers — because the older you get, the greater the risk of dying.
"It makes less sense to you, because the older you get the more unaffordable the premium becomes and therefore the more likely you are to stop paying and lose your life insurance cover."
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