The changes through individual disability income insurance (IDII) will not be the death knell of level premiums, a panel has agreed.
Speaking at the Association of Financial Advisers (AFA) Vision Conference, TAL chief executive, Brett Clark said it would be strange if there was not a future for level premiums.
“If you look at every global life insurance market, level premiums are a very significant and strong part of the market. Australia is unique in its uptake and in some ways has a reliance on step premiums. I would hope there was a future in level premiums, that’s our intent, but there are complications around level premiums,” he said.
“While interest rates don’t make it easy and we’ve seen some pricing pressure on level premiums as a result of that and how it works, within this five-year piece with the income protection that needs to be worked through as well. So certainly not straightforward but it would be strange to me if it wasn’t part of the future.
“Level premiums give a certain expectation that we haven’t been able to fulfil so we have to deal with that in terms of the way we describe it and explain it.”
Also on the panel, AIA chief executive, Damien Mu agreed that there was a future for level premiums and that what had worked well were fixed term level products as it gave clients more certainty.
“Fixed terms can give more certainty where we are not over pricing products because of a degree of uncertainty, and we can factor that life might change, but have certainty whether it is five, 10, 15, 20 years that matches a client’s needs,” he said.
“That can be done and should be done. When we step back, it’s thinking about how it works in the whole ecosystem, against best interest duty, pricing, affordability etc. It has to be part of the future but we haven’t had a proper level premium for a fixed term product in the Australian market.”
MLC chief of life insurance, Sean McCormack, also agreed and said what had not changed was that Australians still had insurance needs for the long-term and the whole basis of level premiums was putting protection in place for the long-term.
“We’ll see more and more level premium contacts for fixed terms and that will become more of the norm. I don’t agree that the changes though IDII represent the death knell of level premium,” McCormack said.