The “once in a generation shift” in the structure of the life insurance industry has meant that it’s more important than ever for clients to get advice and review the policy structures they have in place, according to HLB Mann Judd.
Andrew Kennedy, head of the accounting and advisory firm’s risk business, HLB Insurance Services, said in a client webinar on Thursday that premium volatility and government changes to insurance in super meant an enormous amount of advice clients would benefit from a review of their life policy arrangements.
“At the moment there's a once in a generation shift in policies, it’s been occurring over the last four years and it’s looking like it's going to continue,” Mr Kennedy said.
“It’s resulted in massive premium volatility, so there’s a requirement that people need to review their existing policies to make sure they’re still appropriate.”
Mr Kennedy said self-employed clients and others with variable income levels could be particularly affected by recent APRA restrictions placed on income protection products.
“A lot of insurers have been reporting losses that has been linked to unexpected claims experience and the underperforming bond market, so what’s ended up happening is APRA has put an intervention into income protection,” he said.
“The idea around this is to improve sustainability, so what they’ve done is cancelled some of the benefits we used to recommend for clients, particularly agreed value which was useful for high commission, high bonus or self employed clients. They’ve also changed the way we calculate pre-disability income.”
Mr Kennedy said clients were often not aware of the dramatic premium hikes occurring within their super fund as insurers adjusted their prices to deal with the recent onslaught of claims.
“We’re seeing large premium increases for TPD and income protection – those have been significant for insurance held inside super, particularly the industry funds,” he said.
“We’ve seen some of these increases slip under the radar because often insurance is not up the front in your super statement, it’s on page five or seven where you stop paying attention.”
He added that changes to insurance arrangements following government legislation had also seen life policies wiped out altogether for some fund members.
“The other thing the government has done is change eligibility for insurance in super so some members have been exited, and they think they’re covered but are actually not when they go to claim,” Mr Kennedy said.
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