Demand for simpler trauma policies

• Tweet

Demand is increasing for simple trauma products with cheaper premiums, Fidelity Life boss Milton Jennings says.

Monday, January 19th 2015, 6:00AM 3 Comments

by Susan Edmunds

Premiums have increased as claims soared and insurers face larger tax bills.

Policy definitions have widened, leading to significant claims payouts for trauma and income protection policies. Grandfathering provisions on income tax for life insurers run out at the end of June this year.

“It will be challenging to get premium increases through to cover that tax increase,” Jennings said. “We’ve seen just about every company put rates up over the year, even Partners Life which is not subject to the old rules. The rates are going up because of tax and because of the amount of trauma and income protection claims coming through. It’s not good for the consumer or for us either because we hate putting premium increases through, we always lose quite a few policy-holders who can’t afford it, especially when it comes with age-related increases. We end up with people cancelling policies just when they need them most.”

Advisers could warn their clients that premium increases might be coming, Jennings said.  “For the last 10 years insurers have kept widening and widening benefits and kept increasing medical limits so more people are going through as standard and more are able to make claims.”
He said he could not see the situation changing any time soon.

“Until they get rid of research houses I can’t see insurers pulling back. Companies want to be at the top of research houses’ lists with products and the only way to get there is by widening benefits. I can’t see an end unless we get one of those big losses like have come through in Australia, something that prompts an industry-wide correction.”

In Australia, CBA has so far paid out A$52 million in compensation to clients who received bad advice.

Jennings said companies would offer simple trauma products for those who could not afford the more comprehensive policies “We’ve always had the more stripped-down version but it hasn’t sold well. Advisers want to recommend the policy with full benefits and sell the best product possible. But with prices starting to climb there is demand coming in for simpler trauma products.”

Comments from our readers

Sign In to add your comment