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.”