ClearView to cease agreed value IP from 31 March

Insurer ClearView will cease the sale of agreed value contracts for Income Protection (IP) insurance from 31 March.

The insurer confirmed to the Australian Securities Exchange (ASX) today that in the second half it would launch a new indemnity type IP product to offer  a lower maximum monthly benefit at a competitive premium rate and stated that it was “highly likely that further price changes will be made in coming months to reflect increased claims rates”.

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It said that a repricing of the product and a detailed review of the claims assumptions was also underway and any further increases to claims assumptions were intended to be recovered through premium rate increases.




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Quick to jump on this money saver and of course use it as an excuse to raise existing customers premiums.. who would have seen that coming! Watch all of the others follow. Clearview also still offering discounts on new business though.
The LIF has been a fantastic outcome for everyone!

Perhaps you're not aware that APRA is so concerned that life companies are losing so much money on Income Protection policies that they fear the product will be lost to the market. As a result, they have intervened with measures to restrict types of policies sold and are forcing the life companies to hold extra capital until such time that they prove they are addressing the issue. That a life company is increasing premium rates is expected and sane!

Yes. But you seem to have missed the point that the insurers have all been raising premiums on existing customers (for higher claims experience) but discounting premiums on new business for the very same products. They are trying to encourage churn. Lapses are increasing. Advisers not writing new business due to commissions rates so low that you lose money in the process so under-insurance increasing. The FSC and insurers are to blame for this and are losing money but they still continue to pay ridiculous exec salary and bonus increases compounding the issue by refusing to cut their costs.

Excellent work by Kelly O'Dwyer and all the people from ASIC and Gov't. Your incompetence has really been astounding. What a raging success LIF has been. Fewer people insured, way higher premiums, and now products being downgraded. Bravo!

This problem has nothing to do with LIF. Australian life insurers have been underpricing DI products for decades. This type of protection will be lost to Australian consumers unless drastic action is taken - hopefully we're seeing a significant shift now.

Let me guess.
We are now receiving emails from all insurers notifying us of the end date of their Agreed Value IP offering.
All applications for Agreed Value would have to be assessed and finalised by 30th June with the 1st April being a common date by which they will no longer be available for new business applications.
Forgive me if I sound cynical, but how hard does anyone believe the underwriting process may be between now and the 30th June ?
If the Agreed Value IP space is in such a dire situation, will it be next to impossible to get a new business case submitted and implemented quickly on reasonable terms prior to the cut off date or will the Underwriting process be as normal irrespective of whether the insurer or the re-insurer really wants to be taking on any more Agreed Value IP business in the next 2 -3 months ?
The other concern is that insurers and the re-insurers will start to increase the premiums for the existing Agreed Value policies to a point where it will be unsustainable for the client to continue funding the cover and will either let the insurance go or request an alternative option.
The only alternative available will then be an Indemnity policy.
How does the adviser meet the client best interest duty if a client is in a product that is unsustainably expensive and an equivalent quality replacement product no longer exists ?
The client will demand a cheaper alternative, but the adviser would have to recommend they remain with their existing cover based on the Agreed Value definition.
I can see the remaining Agreed Value policies to be classified as " legacy " product and as we have seen so many times previously, these may be deliberately priced to eliminate the liability.
This will make for very interesting times regarding advice to retain or change providers, but it may well leave the adviser exposed to accusations of churning and replacement to an inferior product.

Why would you try to push through an agreed value policy now or any income protection policy for that matter? Anything you write now, even indemnity policies, will become part of the legacy book come 1st April. You'll see those premiums double in a matter of a few short years, that will include level premium policies and indemnity policies. APRA's sent a clear message saying that the risk in the current products has been under-priced. Insurers will take the opportunity to blame the government for the increases in rates.

Personally I don't know why they didn't take the easier option of limiting benefit periods to 5 years but keeping the products as they are. That would put a ceiling on every claim and make it easy for insurers to price the risk. It also gives the Adviser the ability to provide quality advice around appropriate levels of TPD and trauma to sit alongside the IP policy.

The issue of Level premium has been an absolute debacle for years now.
Whilst ASIC maintain that all advice should investigate and analyse the difference or benefit for the client between the Stepped and Level options, the advice itself is fraught with danger in recommending the long term benefits of Level premium simply because they are not guaranteed to remain at the same age related rating at commencement.
Taking a level premium option for the purpose of long term premium savings is destroyed when the break even point is approx 14 years and that is without any mass Level premium increases.
So the client elects to take Level premium, the insurer lifts the Level rates in the 5th year, again in the 10th year and again in the 15th year destroying any possible long term cost benefit entirely when compared to the Stepped premium option.
Level premium option should be exactly that....Level from policy inception to completion.
The advice wording around comparing Level and Stepped premium should be very clear.
Very clear messaging must be included to highlight that Level premiums may not remain Level and may be increased at the insurers discretion and therefore any financial advantage from implementing Level premium over the longer term may in fact be lost entirely and result in disadvantage when compared to implementing a Stepped premium basis.
It is wrong that Level premiums are not guaranteed to remain for the life of the policy.

I've pushed level premiums really hard over the years, particularly for anyone under 35 but it's made for a lot of difficult conversations over the past 3-4 years as people cop 1, 2 or even 3 increases of up to 20% each time. Level premiums really don't work for the younger clients at all for the reasons you've mentioned. The break-even point is simply too long, very few people are prepared to stick with the same policy for 15 years plus.

Level premiums can actually work for older clients, which is something a lot of Advisers don't really look at. If you have a client who is 50 and will definitely need to protect their income for 10 years, then they can be a good candidate because the break-even point can be as little as 3 or 4 years.

I've personally had a level premium policy in place with Comminsure for 13 years and I'm just getting ahead now, and that is a 'True Level' policy.

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