Adam Wade, director of northern NSW practice TNR Wealth Management, told ifa his clients were being unfairly penalised by pricing sustainability issues in the life industry while insurers chased new clients with loss-leading premium rates.
“I have a client who has come to me with a TAL policy taken out in 2012. The annual premium is $8,102 because it is on series 30,” Mr Wade said.
“A new client can take out a new policy with TAL for $6,051 with the same sum insured, benefit and wait period, so the existing client is being charged $2,051 which is 34 per cent more than a new client.
“TAL will argue it is a different PDS, which would imply the old policy is better than the new policy. Or is it because they push the premiums up on existing clients and discount new clients to get them in the door and then push the premiums up on them?
“To move our client to the new policy requires underwriting, which in this client’s case will result in an exclusion. So the client is essentially stuck paying 34 per cent with the insurer they have been loyal to or take on a policy with an exclusion. Why is this behaviour allowed?”
The comments come following the recent release of a white paper from life insurance group PPS Mutual that noted the issue of insurers offering front-loaded discounts to win business was endemic in the sector at present.
The paper noted that while front-loaded discount insurance products were 2.5 per cent cheaper than the competition in year one of a policy, by year three and subsequent years the products were 5 per cent more expensive on average than the market.
“In the case of one insurer offering a 25 per cent up front discount, if you take into account age based increases and indexation, policyholders could face a second year premium increase of 50 per cent,” the report said.
The issue also came to the fore at the recent FSC Life Insurance Summit, where industry attendees were asked in a live poll to nominate the top issue affecting life insurer sustainability. The top response from the audience was “irrational competition”.
Ian Laughlin, convenor of the Actuaries Institute’s taskforce on disability insurance, told the summit that the poll results were particularly telling around the unhealthy business practices that had been developed in recent years as insurers pulled out all the stops to chase market share.
“We’ve adopted poor practices and hoped that they would work out. There’s a really strong message if you’ve got the industry saying they’re worried about irrational competition, that’s a real call to management and boards in the life industry to sit up and take notice,” Mr Laughlin said.
“If you go to the group market and see the bouts of poor financial performance, it’s often a result of a focus on the short term and winning a big group contact, and you pay the price down the road because you might have won it on the basis of probably an unsustainable price.”
A spokesperson for TAL said the insurer was grappling with similar industry-wide issues, but that it was not its practice to offer front-loaded discounts on retail life policies.
“There are many overlapping aspects to design and pricing in relation to Individual Disability Income products which the industry is currently examining and addressing, in line with the timeframe set down by APRA,” the spokesperson said.
“Ensuring these products are fit for purpose, affordable, and deliver a good outcome for and meet the needs of customers is essential to supporting both product and industry sustainability for the long term.
“We endeavour to keep premiums as stable as possible for the life of the policy by pricing our products sustainably for the long term, and we do not have any income protection products on offer which feature front-loaded discounts.”
What I see here is a lot of passion, a huge lack of trust (with life companies, regulators) and also a sprinkling of misinformation and a huge amount of lack of information.
Even though the thrust of comments would make me believe none of you will believe this, but I believe the life companies are suffering and are faced with either a need to close to business or make drastic changes to pricing. At the same time they know both advisers and policyholders are also suffering.
The problem is very very difficult and it won’t be solved unless parties get back to being on the same side. And that includes being open and honest about what is going on – there is no reason the life company could not share why it is acting in certain ways and engaging with advisers on it.
ASIC is useless, nothing more needs to be said !
What’s becoming very clear is that both APRA and ASIC have little thought or care for the advice industry and if Insurers are cutting trails whilst hiking their premiums, then that is all ‘fair and reasonable’ and the blatant ‘unconscionable conduct’ equates to “nothing to see here, now get back in your box little people”.
I am absolutely sick to death of insurers jamming advisers and clients and getting away with it. Our IP policies which have been in force at level premiums for years have gone up by $1,000 a month this year because they are trying to get us all out of the market by having an agreed value. How do they constantly get away with this? We are jammed in every way by these companies, 2-year writebacks, remuneration chopped in half, more and more compliance where we don’t sleep at night because they just constantly change the goal posts to suit themselves and yet, we have no voice, no one gives us any support. They are all a bloody joke and they now ask for us to complete surveys each phone call…wouldn’t give them one more second of my breath when I don’t have to!!!!
Honeymoon discounts by insurers are killing our industry. I now look at minimum 5 years cumulative premiums to work out what is in my clients best interest. Can’t believe advisers still recommend the insurer who offers 25% discount year one. Once that year is over the client will be looking for the next discounted policy which encourages churning. Life policies are meant to be long term contracts of the utmost good faith. Insurers its time you start acting in good faith and take care of your loyal customers.
…the advisers….
It’s a ridiculous situation where the financial performance of insurers is under scrutiny, yet they continue to offer discounts to new clients, slam existing clients with significant premium increase, and leave advisers with the issue of appeasing clients and still maintaining best interest duty! Great environment to encourage churn…
TAL in my view sucks in every way possible!!
Don’t use them at all
Do the right thing by your clients at the end of the day they only listen and trust YOU
How’s this one for an example? AMP long term client since the 80’s. Earthmover, 52 y.o.. Income protection agreed value contract benefit of $3900 per month to age 65. Not insurable now due to health. 2018 renewal $800 per month, 2019 renewal $970 per month, 2020 renewal $1470 per month and wait for it ….May 2021 renewal $2460 per month. Premium is now $63% of monthly benefit. Disgusting behaviour from our former No1 Australian life insurer.
They want to get to the point where the client goes “Cancel”….
Those massive price increases make sense as the insurance companies make large income protection losses. I want to see the actuary who made the calculation as follows:
If you increase your premium by x% (40%, 50%, 100%, 150%) your book will deteriorate, i.e. claims will be that much higher as a percentage of policies as the good risks get new policies. However, you will still be making fewer losses as the remaining book pays that much more in premiums…
What the actuary didn’t include in their calculation was the loss of future revenues due to the destruction of goodwill but then this wasn’t part of the brief…
It was the same with LIF – an actuary said a 2-year clawback will save a proportion of premiums and therefore will make us more money. Further, pushing overall commission payments into the future will save us money now (bonuses all around) and will stop advisers writing policies that won’t be renewed after year one.
The actuaries clearly didn’t calculate how many advisers would stop writing insurance due to the changes. Very clever people.
Actually it is Resolution Life using the time they have where they can trade as AMP so the reputation damage goes to AMP. Once they trade under their own name there won’t be price increases.
Nasty.
so clients are smashing me for insurance advice requesting reducing cover / quotes / alterations etc., premiums are sky high 50% 75% 100% increases at renewal, regulation is choking new business, and the best bit – I no longer get paid to service them….
…which is why we have made the decision not to offer life insurance anymore….
Wait until the IP changes come in and legacy products are like gold. Wait and watch the insurers gouge clients then… What a disgusting profit driven industry platforms and insurance is. In this day and age there should be better solutions to negate the need for them more easily.
He could be right. But when all he is saying is monthly benefit, waiting period and benefit period are the same, there’s a lot of other variables he’s not taking into account.
I never use TAL or AIA for this very reason. If you look at premiums over 5 – 10 years you will see how the premiums increase dramatically. No point comparing first year premiums when the rate rises are excessive from Year 3 onwards.
This!!! Makes a complete mockery of the ‘research’ we are required to do!!
TAL and AIA were the ones who provided group policies to the union super funds a few years back with ridiculously generous automatic acceptance conditions. Lots of consumers with chronic conditions switched to those super funds to get the insurance. Seems like TAL & AIA are shafting retail clients to recover the losses they must be making from those deals with the devil.
And they bought Asteron…
It’s crazy – one of the main reasons reforms were introduced was to curb the ‘churning’ problem we had with policies for the SMALL number of advisors in the industry doing so. Due to these ridiculous premium increases, now all ethical advisers are forced to churn either because it is in the best interests of the client or because the client is demanding a swap in cover due to premium affordability! What a joke!!
Yay !!! my office has been saying this for a few years now. Glad to see it written up for TAL to see. You can rewrite a client cheaper every year with TAL. It’s so embarrassing to explain to a client. Only solution is to exempt TAL from discussion from the start which this can be written in an advice document. It is not in their best interest to get into a spiral of rewriting TAL every year.
The senior execs of these life companies can just swan off maybe with big bonuses, definitely with years of fat salaries and nothing negative about how they have left their books in a very poor way.
When are we going to get a comment from Sally Loane and the corrupt FSC on all of this?? They instigated the LIF under false claims and stated they expected “better outcomes for customers”. Things could not be worse for customers and they are to blame. Any thoughts Sally???
Sally?
The pricing of policies makes little sense, I just increased a clients life and TPD cover and since they now get a volume discount the policy is cheaper than previously, I am seriously getting my client more cover for a lower cost by accident!! Riddle me how that works??
I suspect it is no coincidence that insurers are disproportionately hiking premiums for existing policies, after the LIF fiasco in which regulators deemed product switching to be “churn”. Many advisers are now too scared to switch client’s policies to something better, in case they get reported to ASIC as churners.
I Agree. Existing clients were paying a high premium for existing AMP insurance products, all of them were complaining premiums are too expensive! Switched them to a new AMP product – lower premiums & better features and benefits (U/W involved), my employer got paid most of the commissions & i got called a churner & accused of benefiting from it. LIF should be reviewed & dismantled immediately!
No such thing as churning in the ‘Client best interest’ world…… Its an insurers tag line when actuaries get it wrong. If you are saving the client money for the same policy……. I say write a new policy every year….. You did the right thing…… By the way if I can rewrite an AMP policy I will……. TAL included
Unfortunately ASIC doesn’t see it that way. ASIC is focused on persecuting advisers, not protecting consumers. Even when a switch is clearly in the client’s best interest, ASIC is likely to classify it as churn and persecute the adviser for it.
The avalanche of interference by clueless politicians feathering their own nests instead of working to improve (not erode) the industry portfolio’s they’ve been assigned; conflicted regulators and industry bodies along with senior execs at insurance companies working out short term strategies to increase their bonuses have all contributed to this diabolical situation that ‘US Advisers’ are now having to deal with everyday.
When you marry it all up to the useless piece of adviser regulation known as FASEA, its become near impossible to remain viable in this industry now. How and why is it our responsibility to serve the clients best interest’s without proper remuneration when we have to deal with all this?
Angry doesn’t even scratch the surface for how and I other advisers are feeling. It was NEVER this bad 10 years ago but look at it now. Absolute disaster.
Are you for real? Our industry and the quality of advice within it has come a hundred miles in the last decade. Sure, the regulation is a joke now and ASIC and pollies have no idea what they are doing, but even though they have done a horrible job of executing change, change has happened and the standard of advice now is far better than a decade ago, almost across the board. Sure, the cost of advice has risen too, but in my view, not as much as the quality of advice has risen, nor enough to offset the higher operating costs.
I wish you were right but the current standard is still very low.
I’ve a client paying $10,000 in income protection with AMP and from July the policy is going to “double”…. $20,000.
Had the same experience with AMP last week. Client is paying $3200 for term life only, current rate for new policy with AMP, same cover is $1,946. Found an alternative insurer even cheaper, so hoping he passes underwriting for standard rates with them.
I see this all the time, Zurich are shocking for this as well. I have 2 clients that took at a policy in 2018, they are now paying over $2,000 per annum more than on a new policy with Zurich if I rewrote it today, it happens all the time.
I didn’t think Advisers sold insurance any longer.
Well, you have to define “adviser” i suppose in order to answer your question/statement. There a few ‘Risk Advisers’ who assist clients with nothing but risk advice. There are ‘advisers’ who do both. Then there are advisers who see it as beneath their dignity to help clients with life insurers – the ones who ONLY focus on wealth accumulation for clients – much to the danger of said clients. So, which adviser to you reference? If it is the dedicated risk adviser then they are the ones very much still “selling” as you say, risk protection. Remember, we ALL succeed OR fail in life based on our ability to SELL. Don’t get all airy-fairy around the word “sell”. It is nothing to be afraid of. We sell ourselves all day long. nEven an adviser who does NOT do risk is ‘selling’ himself and his ideas to his client. Certain advisers will never lower themselves to admit this but it is true. This who “sell” risk” products are no worse or better. Ahh, probably better as they are protecting the client where simple ‘wealth builder’ advisers don’t do that OR they see it as ‘dirty’ to involve themselves in insurance. Yes, there are STILL so called ‘advisers that think that way believe it or not. Those advisers will not often mention client-best-interest in a conversation with you.
Why try to divide us by what we do or do not give advice on? Ill assume you are a risky that just does risk, thats fine , there are those that dont , thats fine too. It takes a lot of different people to make the world go around, this us versus them stuff has to stop. We are all advisers trying to help clients, untill we can stop this us versus them crap we will never be taken seriously, think about it. We are all under a enormous amount of pressure at the moment, we should be helping and supporting each other in this time.
Just calling it as I see it. A spade is a spade. I wasn’t attempting to divide us any more than someone saying “it is raining” is being negative on the day – it just is what it is. My point is not a recent phenomena – I and many others have seen this for 3 decades or more. There are indeed just simply different advisers doing different things.
Insurance companies are genuinely desperate and are pulling out all stops to increase profitability by increasing premiums for existing clients. Anybody healthy could well move and get the current lower rates. It is basically making the books look better for the current year but storing up trouble for the future with deteriorating client books.
I have had a client under 50 get a 72% increase on their income protection policy. This client can’t move as it is an old level premium one but the insurers are devastating their goodwill with measures such as these.
However, neither of the above issues will be dealt with by the current managements.
“TAL will argue it is a different PDS, which would imply the old policy is better than the new policy” – is it? You are an adviser getting paid for your expertise. It is either better or it is a rip off. I assume you have done a comparison before you had a whinge
I know exactly who this is and you continue to be an idiot! You think advisers are all millionaires working 3-days a week and that we do nothing but sit in our bell towers counting our money. You have no clue what its like being an adviser.
Stay out of these media reports with your uneducated and very clearly biased comments. You’re way out of your league and way off the mark.
Being income protection, the old policy is in all likelihood a better product than what is available today. Pricing increases (in part along with bad claims experience & low earnings rates) are a tactic to force policy owners out of the good policies into ones that aren’t as good.
O’Dwyer! Thanks a bloody lot for the mess you created. Thankfully, you were shown the door by the pollsters in the federal seat of Higgins.
Due to the government, I think the entire life insurance industry has had it.
It’s even worse than that. The life insurance companies are going to existing policy holders and offering discounts if they complete health questionnaires. This partly offsets the premium hikes, but discriminates against policy holders who have had new health issues pop up since the policy went into force. I thought it was illegal for life insurance companies to discriminate against existing policy holders? What is going on? Seems like the regulator has completely lost the plot. Also, BT (which is the insurance company mentioned in the article with the 25% discount on 1st year premiums) removed life insurance commissions for their policies written before 2013 by wrongly claiming they were grandfathered group policies when they are actually retail policies. Advisers were only given 5 weeks notice just before December. If this behaviour wasn’t shocking enough, they then proceeded to hike IP premiums by 50%, which gobbled up the discount passed onto clients through the commission removal. I refuse to work on commissions for any new policies now. If consumers want me to put life insurance in place for them, they need to pay $5K upfront or forget about it. Most baulk. But I’m fine with that. There is plenty of work on the investment side. Cleaner, easier and safer. I’ve had a gutful of these insurance companies. The whole thing is stuffed. APRA, ASIC & ACCC – well done you bloody fools.
yes have the same issue, it is misleading for the consumer given they will be unaware of the accumulated premium later on … smoke and mirrors. Sleepy regulator, government does not care until it is too late. This behaviour by our overseers and insurers is manifested now to the detriment of informed consumer choice who are being dumbed down.
I totally agree! Insurers should be rewarding long-term policyholders, instead of offering upfront discounts. Too many are doing this!
ASIC have no interest in the premium side of life insurers. Claims yes. But general advice in call-centres- NO! AND somehow advisers fees must be ” reasonable” in a high compliance environment. BTs 25% discount may be an unconscionable act under the Trade Practices Act, but John Howard removed the ACCCs power in life insurance to a large degree.
I really, really, really dislike upfront discounts. It adds absolutely no value to advisers or clients. It means they can get away with paying less upfront comms to advisers, and it gives the client very poor visibility as to the true cost of the policy. You don’t want upfront discounts, you want stability in the ongoing cost of the policy!
Mmmm, thought LIF was meant to make things cheaper as it was the “greedy advisor” that was the issue. Turns out that wasn’t the case…. Well no shit Sherlock!
[i]A spokesperson for TAL said the insurer was grappling with similar industry-wide issues, but that it was not its practice to offer front-loaded discounts on retail life policies.[/i]
Lies, Lies and more Lies from TAL.
My own Life/TPD and IP policies have been with TAL for 10 years.
On discussions with them about recent renewal pricing increases they said it’s because I have not been underwritten for 10 years the prices are higher for existing polices v a new policy.
If i wanted to go back through underwriting then TAL get to reassess my risk and price it 20% cheaper.
(But guarantee the prices then increase exponentially after 2 years).
But somehow that is now not a front loaded discount ??? RUBBISH !!!!!!
Aren’t the Life Company actuaries meant to price the policies for the long term ?
Life Insurance will go close to ceasing in Australia the way it is headed.
The following text is a verbatim extract from a TAL retail quote I prepared recently: ‘This quote also contains a further discount of 10% in the first policy year, reducing to 5% in the second policy year and to nil in the third policy year. . . ‘
I just had to do this for a TAL client new client debt, we had to recommend cancel existing TAL policy and recommend new TAL policy and got paid nothing for the work…. how about LIF review for the insurance companies for a change
The insurance industry is a looking like a scam, massive increases on level premiums for existing clients, upfront discounts on premiums for the first year that gives a false long term price. Not good.
And Agreed Value contracts that are now impossible to replace have seen huge premium increases…take away competition you simply take away sustainable pricing models or alternatively push clients to inferior contracts based on affordability rather than definitions.
Its going to only get worse as advisor numbers drop dramatically and the remaining advisors simply cant afford to place risk business based on all the compliance requirements.
That’s nothing compared to AMP and BT increasing premiums by 70%+. How is that acceptable?
“An adviser has slammed” could be the biggest understatement ever! The entire advising industry has S L A M M E D the hikes!