Despite revenue growth, TAL is not immune to the challenges facing the life insurance industry, having more than halved its net profit in the six months to end of September.
TAL group chief executive Jim Minto said the reporting season had revealed a higher than expected level of claims and policy lapses, saying the life insurance industry would need a period of adjustment.
TAL’s Japanese parent company Dai-ichi Life released its results for the six-month period, showing TAL’s net profit fell from $68 million in the previous corresponding period to $29 million this year, which was mostly due to changes in discount rates and deterioration of claims experience.
Its underlying profit also fell from $70 million last year to $46 million at the end of September 2013, which TAL group chief executive officer Jim Minto attributed to negative claims experience.
“While TAL has also seen larger effects from claims, we have, partly as a result of price adjustments, been able to continue to grow TAL to become Australia’s second largest life insurer as measured by in-force premiums.”
The company experienced a higher level of claims on living insurance products, such as disability, income protection and trauma cover, which resulted in earnings reduction.
Minto said TAL would continue to work on reducing lapses, which are running at higher than expected levels across the industry.
A key element was to better inform and educate customers about the value of life insurance.
“Family budget pressures and price shopping behaviour have also had a big impact due to the ongoing economic uncertainty as Australians continue to reduce costs and save more,” he said.
“The concern is that people do not maintain adequate cover and it is only at claim time that customers realise the major consequences of that decision to cut back or lapse.”
However, TAL’s revenue increased by 15 per cent to $1.1 billion, with new business having grown 33 per cent to $261 million.
Total in-force premiums grew 16 per cent to $1.76 billion, according to the results.
“The really good news is people are accessing and getting major benefit from their life insurance in this period of higher claims,” Minto said.
“While there has been publicity about price increases for life insurance within superannuation, the availability of life cover in super has resulted in many people getting access to cover they might not otherwise have obtained,” he added.
“We believe major schemes will adjust cover design and benefit amounts to improve affordability and sustainability of these covers. This will help to maintain the enormous benefits Australians receive from having this life insurance in superannuation.”
