According to APRA’s latest statistics, total revenue across the life insurance sector for the year to June 2020 was $15.9 billion, down 55 per cent from $35.6 billion the previous year.
Net policy revenue also declined 9.2 per cent from $16.4 billion in the 2019 financial year to $14.9 billion in the 2020 year.
The industry made a net loss after tax of $1.6 billion over the 12 months to June, a “significant reduction” from the previous year’s $438 million profit, APRA said.
“This deterioration was caused by poor results in both the December and March quarters,” the regulator stated.
Risk products accounted for the bulk of this deterioration, recording a combined after-tax loss of $1.4 billion in the year to June, according to the data.
“Performance of all risk products deteriorated over the year apart from individual lump sum [products],” APRA said.
“In particular, individual disability income insurance (also known as income protection insurance) reported a substantial loss, primarily driven by loss recognition as adverse claims experience persists.”
Looking at quarterly statistics, life insurers also saw a 6.2 per cent decline in net policy revenue from the March 2020 quarter to the June 2020 quarter.
Income protection products alone saw a $179 million loss in the June quarter, the data revealed.
Commenting on the results, FSC senior policy manager of life insurance Nick Kirwan said the performance of income protection products was likely to worsen further in coming months.
“These income protection losses were driven by a surge in the number and duration of claims, especially for mental health conditions,” Mr Kirwan said.
“We expect mental health claims to increase in the months and years ahead from the effects of the COVID-19 pandemic, exacerbating people’s isolation and financial hardship.”
However, he added that life insurers would look to refresh income protection policies in the long term with a focus on “the three A’s” – availability, affordability and assurance.
“Expect to see this new generation of more sustainable income protection policies becoming available in the next year or so,” Mr Kirwan said.
“Expect to see more watered down income protection policies becoming available in the next year or so,” Mr Kirwan said.
In my opinion, this result highlights what a complete disaster many of the reforms have been for the life insurance sector. The fact that many advisers were warning about this from the outset will not help the average Australian who will not have adequate cover and cannot meet their needs when an insurable event occurs, or the client who has adequate cover but has to let it go as the cost of remaining in the ‘pool’ becomes simply too expensive.
[b]It is frustrating and distressing to many of us who have seen first hand, the value of Life Insurance.[/b][b][/b]
I used to write $200k plus every year once upon a time but not anymore.Over regulation and lower commissions mean it is not wort my time chasing new business.I just look after my existing clients now.
Spot on, as sad as it is, I do exactly the same for the same reasons. FARCE-IA isn’t helping either with their time wasting, expensive and pointless ‘ethics’ exams. What an absolute joke these fools are foisting on to advisers for their own self interest and money-grubbing.
I barely write any insurances these days. If a client has existing policies I just leave them as is, not worth rewriting them. Lots of work for not enough money + poor underwriting decisions make insurance too difficult for not enough money. Even if we did rewrite them the premiums would go up 25% in year 2 and would then be liable to a lapse and clawback. Just not worth the risk.
The FSC just blaming mental health claims is glossing over all of the other issues.
New business premiums used to offset claims losses but new business has fallen off a cliff because of the LIF. The FSC are directly responsible for this.
The FSC and its members thought the LIF would get rid of “expensive advisers” and they would be able to sell more junk direct insurance instead. The RC stopped this. The FSC have never regulated junk direct and are responsible for its demise.
The FSC have turned a blind eye to its members discounting new business premiums for the very same products they are increasing existing customers premiums for siting “poor claims”. Its members trying to encourage churn.
The FSC purposely hid the industry true lapse data until after the LIF was passed and ASIC admitted they got it wrong. The FSC are directly to blame for this.
Sally Loane stated the LIF would have better outcomes for customers and it has proven a catastrophic failure and the FSC are to blame and Sally has gone into hiding.
The FSC have not issued one penalty for the constant breaches to its useless Life Insurance Code.
The FSC are a lobby for profit group and nothing more and should be closed up.
Apart from the last sentence – very true.
LIF’s going well isn’t it O’Dwyer / FSC and ASIC
Once the RC pretty much killed off Dodgy Direct Life Insurances – your plan was stuffed.
And now the whole Life Insurance Industry is STUFFED.
When will FSC admit their delinquent and fallacious policies are suicidal?
I don’t know about anyone else, but I have lost all motivation for life insurance advice now. I won’t take a client on board unless they are profitable solely on a fee-for-service basis. I discount the commissions to nil. What is the point of commissions when they are banned by FASEA (even though they deny it)? ASIC want them reduced to zero and history suggests they always get their way. Plus, after seeing the ruthless way the Government trashed businesses with grandfathered commissions, who can move forward with any confidence? As a result of all this, my volumes have plummeted. Very sad, because I was a passionate and very active risk writer.
Lost the motivation long time ago. Since 2013, a slow-motion train wreck.
New generation of ip policies, so decrease benefits in other words. Of course they will need to jack up existing policies again too, probably a week before xmas so clients can get the news when they are trying to have a break. This is the only awnser they have. All those highly paid executives, and this is all they have to offer. Useless as an ashtray on a motorbike. Wheres the value of these people? Id be asking every single executive at a loss making insurance company to resign. They arent performing up to standard and we cant move forward with these has beens and hangers on and thier outdated mentalities.
This is catastrophic and there will be drastic measures if this continues – and there isn’t enough change on the horizon. The protecting your super legislation is working as intended and LIF is continuing to be catastrophical for new business.
Perhaps there is no time to wait until ASIC’s review next year and then the need to enlighten the legislator on what is needed in addition to punishing the wrongdoers.