Risk advisers need to make clear insurance expectations
Risk advisers need to make it clear to clients that level premiums are not a guarantee and what they are to expect with their insurance product so that they are not shocked when their discounts expire, according to life insurers.
TAL chief executive, Brett Clark, spoke on a panel and said level premiums were an important part of the insurance market and that customers needed to understand it was not guaranteed like step premiums.
“I'm really sensitive to the issues that advisers have had to deal with some of the pricing increases around level premium, but the distinction is that level premium does not mean guarantees it means a different pattern of premium payments over time and in many cases for long-term life insurance customers at an appropriate premium pattern,” Clark said.
AIA chief executive, Damien Mu, agreed and said the Australian market did not have scale on level premiums, which was needed for insurance pools to work.
Mu said the industry needed to look at how to bring shorter-term level term premium products to market such as five, 10, or 15 years that had a component of level and stepped as people’s needs changed over time.
Zurich life and investments chief executive, Justin Delaney, said advisers needed to help tackle the “bill shock” customers received after their first-year discounts expired.
“There’s no doubt that over the last few years price has become more important and how new business flows have been attributed across the market. I think the importance of that first-year price, unfortunately, has become a great determinant of placement and that’s helped drive some of the discounts in market,” he said.
“From an advice perspective, particularly if the customer has a clear view as to what that sort of three, four or five year projection looks like – that's really what we should be focused on.
“I can't see necessarily not being in a customer's interests if they are getting a better deal in that sense. There's no doubt that's something we need to tackle because that bill shock – particularly because we know is an important consideration for many customers – particularly if they weren't aware of that being an outcome.”
MLC chief life insurance officer, Michael Rogers, said discounting in the first year needed to be thought of in the context of what the client wanted to achieve and the sustainability of the product.
Rogers said while the previous approach to premium increases was clearly unsustainable the industry should not discount the role of offering better pricing for new customers where there were quite different product designs.
“Obviously, where a product design that’s delivered to the market at a lower price and we would pass that on to our customers. But again, we need to consider all of that in the context of certainty and sustainability around claims, payment ratios and all the other issues that our actuarial colleagues factor into pricing,” he said.
Rogers said after that, the industry needed to figure out how to easily move an advised client to a more contemporary lower priced product.
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