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TAL calls for level premium pricing

TAL has responded to the interim Financial System Inquiry (FSI) report, calling for regulatory changes to make “affordable” level premiums more attractive to consumers.

TAL group chief executive Jim Minto said that level premiums are comparable to fixing mortgage rates - which allows for better household budgeting - but that consumers are overlooking the pricing method for stepped premiums which have a lower initial cost.

“Australians are familiar with fixing their mortgage rates and locking in utility rates to manage costs, but are more reluctant to fix their life insurance premiums which, in the long run, usually end up cheaper overall,” Mr Minto said.

“We have found that while most people choose stepped premiums for their life insurance which rise with age, they are overlooking level premiums which stay the same.”

“Although level premiums initially start higher than stepped premiums, they can provide households price certainty for the future because families don’t have to find extra funds each year.”

In its initial submission to the FSI, TAL recommended changes to insurance premium regulation to help promote the merits of level premiums.

It also recommended that policies sold to people on benefits for fixed incomes, such as pensions, be level premiums only.


Mr Minto said consumers are continuing to voice concerns about rising costs and budget pressures, which is why many opt for stepped premiums.

“But one of the problems with stepped premiums is that people can discontinue their valuable cover as the price increases more in later life, and they may even stop paying for their cover at a stage in life when they actually most need it,” Mr Minto said.

“Stepped premiums are in many cases suitable, particularly where the need is shorter term, but level premiums provide pricing certainty and predictability over the long term.”