Clients receive better life insurance outcomes through an adviser in terms of both admittance rates and claims paid, new statistics from the prudential regulator reveal.
APRA’s Life Insurance Claims and Disputes statistics present the key industry and entity-level claims and disputes outcomes for 20 Australian life insurers writing direct business covering the 2018 calendar year.
The data is part of a project between APRA and ASIC aimed at making it easier to compare life insurers’ performance in handling claims and disputes.
The APRA publication covers the 2018 calendar year and is the second to use the full data set since it was launched in March 2019.
Overall, the APRA statistics revealed that the admittance rate across all cover types and distribution channels was 93 per cent in 2018.
Individual advised business generally showed higher admittance rates than individual non-advised for the same cover type.
Advised life insurance has higher admittance rates than non-advised when it comes to death cover (96 per cent v 88 per cent), total and permanent disablement cover (87 per cent v 59 per cent) and disability income insurance (95 per cent v 85 per cent).
Trauma insurance admittance rates were the same across advised and non-advised at 87 per cent.
“This could be due to the policyholder having clearer expectations upfront of what is covered by the product, or (related to the previous point) the adviser discouraging the policyholder from lodging a claim that is not covered by the policy,” APRA said.
The exception was individual advised accident business, which the APRA statistics show had an unusually low admittance rate compared with non-advised (19 per cent v 82 per cent).
“However … the number of observations is quite small (80 finalised claims, versus 3,519 for non-advised), plus APRA was informed by the main writer of this product of some existing data limitations that have reduced the accuracy of their reported results,” the publication said.
Claims paid data
When it comes to claims paid, individual advised insurance had a higher ratio than individual non-advised across death cover (39 per cent v 32 per cent), total and permanent disablement cover (45 per cent v 28 per cent) and trauma cover (62 per cent v 40 per cent).
However, APRA urged caution in interpreting the claims data as a measure of consumer value or product profitability.
“For insurers, claims payments are only one part of the costs associated with an insurance policy. Other costs, such as administration, acquisition costs and claims reserves, are not included. Whether and how profitable the product is to the insurer will depend in part on these factors,” APRA said.
Further, the report found that, in general, individual products will have higher acquisition costs associated with the policy compared with group products.
“As these costs will make up a larger proportion of the overall premium income, the claims payments will be a correspondingly lower percentage,” APRA said.
“Across all distribution channels except group ordinary, disability income insurance business has the highest claims paid ratio. This aligns with the observations made in APRA’s thematic review into the sustainability of this product.”
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