The Australian Prudential Regulation Authority (APRA) has delivered new data confirming that life/risk advice delivers better outcomes in terms of successful claims.
APRA’s latest Life Insurance Claims and Disputes Statistics covering the 12 months to 31 December, 2020, concluded that, generally, “individual advised business shows higher admittance rates than individual non-advised for the same cover type”.
It said this could be due to the policyholder having clearer expectations up front of what is covered by the product, or that an adviser discouraging the policyholder from lodging a claim that is not covered by the policy.
It said the exception was Individual Advised Accident insurance which had an unusually low admittance rate.
The APRA analysis said that, in general, individual products had higher acquisition costs associated with the policy compared to group products.
“As this is reflected in the premium charged, the claims payments for these products will generally be of a lower percentage of the premium income.
It said disability income insurance (DII) business had the highest claims paid ratio for all distribution channels.
“While a ratio of over 100% suggests good value for policyholders, this is not sustainable and will threaten the ongoing availability of IDII for the Australia community in the future,” APRA said.
“With the release of the final sustainability measures and the introduction of the individual DII capital charge, APRA is working with the industry to move the product to a sustainable state and thereby deliver better outcomes for policyholders.”