FSC defends life/risk premium increases

The Financial Services Council (FSC) has sought to use the latest Australian Prudential Regulation Authority (APRA) life insurance data to defend increases in life insurance premiums. 

It has pointed to increasing claims as being the reason why many Australian households would have noticed an increase in their life insurance premiums, noting that many of those increased claims were around mental health conditions which were now being exacerbated by the COVID-19 pandemic. 

The FSC’s acknowledged what it described as “gloomy” APRA data which had revealed an overall total net loss after tax of $1.6 billion for the year to 30 June, this year. 

However, the organisation’s senior policy manager for life insurance Nick Kirwan noted that the “industry had bounced back slightly from the poor result from the previous quarter’s loss of $972 million, with a $423 million profit in the March to June 2020 quarter”. 

 “However, the results continue to be dominated by higher than expected claims for individual income protection insurance (IP), which saw a net loss after tax of $179 million in this product alone, wiping out almost all the profit from other individual product lines,” he said.  

“These income protection losses were driven by a surge in the number and duration of claims, especially for mental health conditions. We expect mental health claims to increase in the months and years ahead from the effects of the COVID-19 pandemic, exacerbating people’s isolation and financial hardship.” 

“The life insurance industry is playing its crucial role in protecting the Australian community. Overall, during 2019 life insurance companies paid out $12 billion to 101,821 Australians and their families. Every single day last year, the industry paid out the equivalent of almost $33 million to 279 Australians and their families, providing crucial financial support when people need it most.    

“The flip-side of that coin is that these increasing claims are the reason why many Australian households will have noticed increases in their life insurance premiums. We know premium increases are never welcome, but like any business, life insurers must balance the books. Premiums coming in must cover the cost of the claims going out,” Kirwan said.    

“It isn’t all bad news on premiums though, life insurance companies all have in place measures to help customers in financial hardship. If you need financial help you can contact your life insurance company or financial adviser.”  

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Why dont insurers offer IP policies with inbuilt mental health exclusions and then charge a higher premium for the mental health option?

At last the FSC is publicly acknowledging the fact that an explosion in mental health claims is driving up premiums. Now what are you going to do about it FSC??

It is unfair and unsustainable to expect a small and shrinking number of policyholders to shoulder the financial burden for this large and growing issue. Mental health cover needs to be made an optional extra in IP and TPD policies and priced accordingly. Alternatively it needs to be completely removed from the private insurance sector, and handed over to the government to deal with.

'Noticed increases in their life insurance premiums' - that's pure gold. They haven't just noticed pal, they are acting by reducing cover amounts or cancelling altogether. Are any of these insurers going to be around in 10 years?

Hrmm imagine the uncanny idea of trying to increase the insurance pool. Imagine if they incentivised Advisers to actually write insurance, and a regulator that supported this idea with some logical & efficient compliance. Just imagine....

Wondering if the FSC have figured out there may be a direct correlation to the number of policies/people that are no longer participating in the pool of lives insured to maintain viability after the incredible reduction in sales of life insurance policies after LIF, combined with stupid loss of insurance in group policies after the Hume changes were implemented?

The FSC just blaming mental health claims is glossing over all of the other issues.
New business premiums used to offset claims losses but new business has fallen off a cliff because of the LIF. The FSC are directly responsible for this.
The FSC and its members thought the LIF would get rid of "expensive advisers" and they would be able to sell more junk direct insurance instead. The RC stopped this. The FSC have never regulated junk direct and are responsible for its demise.
The FSC have turned a blind eye to its members discounting new business premiums for the very same products they are increasing existing customers premiums for siting "poor claims". Its members trying to encourage churn.
The FSC purposely hid the industry true lapse data until after the LIF was passed and ASIC admitted they got it wrong. The FSC are directly to blame for this.
Sally Loane stated the LIF would have better outcomes for customers and it has proven a catastrophic failure and the FSC are to blame and Sally has gone into hiding.
The FSC have not issued one penalty for the constant breaches to its useless Life Insurance Code.
The FSC are a lobby for profit group and nothing more and should be closed up.

Looks like it's now a "lobby for loss of profit" group now.

75% increase in my life and TPD premiums via Care Super about 12 months ago. Legalised theft.

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