In a statement, AIA Australia chief executive Damien Mu said the prudential regulator’s announcement that it would place capital penalties on insurers from this month to push them to reform their income protection products had provided important “clarity” to the market.
The news came following an Actuaries Institute taskforce review of the income protection insurance segment, which concluded that it was at risk of failure unless serious changes were made to product design.
“There is a clear need for simpler products that continue to meet customer needs and deliver value,” Mr Mu said.
“We acknowledge and support APRA’s views, and now it is up to the industry to step up, using the work of the taskforce and APRA’s latest communication to insurers to move forward.”
Mr Mu said the insurer would be launching a new sustainable disability insurance product in the coming months, and that AIA also believed advisers had an important role to play in ensuring the future sustainability of the industry.
“The taskforce’s recommendations show that the issues inherent in disability income insurance are broader than simply product design, and we all have a role to play in seeking improvements,” Mr Mu said.
“The detailed ecosystem highlights the important role of financial advice and advisers in helping their clients to get access to the appropriate cover to meet their needs.
“While all organisations will take specific action, we want and need to work closely with advisers, industry bodies including the Financial Services Council, other insurers, and regulators to ensure we can continue to deliver affordable and sustainable disability income insurance to Australians into the future.”
Mr Mu added that life insurance was a “community good” and that AIA Australia was “committed to ensuring the sustainability of our products”.
Something that Mu will never admit; high brokerage, organic market forces and fluidity was healthy for the industry. We were told it was brokerage that wasn’t sustainable. Turns out it was never that, it was IP!!
I can recall Asteron and TAL and others rabbiting on about “sustainability” in their IP product range, clearly, back in the 1990s. I don’t think it has ever been anything more than a marketing sound bite. Current events would seem to support this indelibly. They really have been their own worst enemies – or more correctly the ‘execs’ who ran the insurers – ruined it for everyone due to short-termism. the idiot pollies and special interest groups and ‘experts’ have just finished the hit job for them. Advisers and clients have always been the ones that matter least – in the eyes of all the above. It truly is criminal . . . As the sage old saying goes, [b][size=20px]”Those who produce must beg permission from those who produce [size=20px][/size]nothing”.[/size] [/b][b][/b]The whole story disgusts me after 34 years as a risk adviser. Those execs, pollies, ‘experts’ et al should be abjectly ashamed of themselves, admit their arrogance and become part of the solution to turn around our once great industry and move forward with common sense this time.
This gentleman is always keen to lead the pack! He was on the FSC Board when LIF was introduced.Now that new business is down 50% because of LIF, he is apparently agreeing un-reservedly to APRAs demand for piss-weak IP cover,and attributing that necessity to poor claims experience ONLY. Will just one insurer CEO stand up and tell the truth – IP is no longer profitable because there is no new business coming in, and that is collateral damage caused by LIF
No amount of new business would have made an impact on the hugely unprofitable DI business. S
Your assumptions are incorrect.
And they also appear flawed – are you saying the life companies should operate a Ponzi scheme??
IP is no longer profitable because the product is too generous and claims cost have sky rocketed. Insurers have been nice enough so far to not sky rocket premiums as much as they should, but that’s not sustainable for them (and therefore not sustainable for premium payers either).
Perhaps you are not advising clients? Typical increases across IP have been around 20% on level premiums. I had one last week where the policy has been in force 20 years on level – the increase is 100%. To my mind that sort of mispricing is negligent.
ACCC needs to be informed and across the price gouging that is occurring.
Why has there not been any intervention or investigation by the ACCC. ???
So now all the insurers will price gouge existing IP clients to get them into their “sustainable” IP product. No one sees anything wrong with this?
Guaranteed Existing IP clients will get EVEN MORE SCREWED on existing Policy Premiums until there are non left.
And Ms Hume, ASIC, etc will let it happen.
Of course the LIBS, FSC, ASIC will never accept any responsibility for the LIF disaster they have caused. NEVER.
Is it gouging if they are losing a truckload of money on them and they are overpriced? And the new price aims to make a fair return?
Your LIF killed the industry and there is no going back from that. Very happy to see how much your new business has tumbled. Reap what you sow
LIF has nothing to do with this in my opinion.
I suggest you read the recent draft recommendations made by the Actuaries Institute who are trying to help with what is a complex issue. They are seeking feedback from all stakeholders.
one of the major issues is that stat funds aren’t generating enough of a return and on top of this profit needs to be paid out to shareholders – when banks were the owners profit was sucked out at an alarming rate. Mutualisation of the industry would be a step in the right direction.
Also, the actuaries should be front and centre in terms of blame. Are they not the ones that mispriced mental health claim potential, failed to price agreed value adequately, decided upfront discounts were a good idea?
What AIA’s drop in new business by around 50% has nothing to do with it? Seriously? And the LIF has been the major cause for the drop in new business for all insurers. Another cause could be the grossly overpaid execs, managers, BDM’s and actuaries? As they caused the problem perhaps their pay packets would be a good starting point with sustainability?