The problems which have beset the life/risk sector may be here to stay and have prompted AMP to re-engineer its approach, according to AMP Limited chief executive Craig Meller.
Addressing shareholders late last week, Meller pointed to 2013 as the company's best year since the global financial crisis but warned that those achievements had been offset by AMP's challenges within its life insurance business.
He said higher than expected claims and policy lapses had significantly affected profits in that part of the business, and that it was happening because people were changing the way they think about and use personal insurance such as life insurance and income protection.
"People are shopping around much more than ever before, and changing policies more frequently," he said. "As households come under financial pressure, more people are reducing their insurance cover or cancelling their policies altogether."
Meller said people were making more frequent claims across all types of policies and the cost of these claims was increasing and, partly because of tougher economic times, it took longer to get them back to work.
The AMP chief executive said that while insurance had always been a cyclical business, he believed some of the more recent changes in customer behaviour and expectations were not part of the normal business cycle.
"They are new and they could be permanent," he said.
Meller said it was this belief which had prompted AMP to change its approach to personal insurance in Australia and that it was re-engineering its insurance business as part of a new strategic focus.
AMP Limited chairman-designate Simon McKeon had earlier told shareholders that he believed the business model for life insurance in Australia needed to change.
"The board unequivocally believes this is the right long-term strategy for AMP," he said.
AMP's confirmation that it was pursuing a re-engineering of its insurance business has come at the same time as the half-year results filed by the major banks has confirmed a slight turnaround in their insurance businesses when compared to six months ago.