Russell Cain

Life Insurance Direct has done extensive research of more than 3,000 quotes from 32 brands to launch the 2016 Life Insurance Direct Quote Index. The research reveals that certain big brands are consistently overcharging on life insurance premiums.

“There are many misconceptions about which brands deliver value when it comes to life insurance,” said lifeinsurancedirect.com.au CEO Russell Cain. “We speak to people all the time who have no idea they are being overcharged on their premiums, or where to find good value.”

The 2016 Life Insurance Direct Quote Index has been enhanced to include premium data for policies sourced through 8 major Super funds, as well as the Direct and Retail policy markets. Thousands of quotes have been entered into the Quote Index, to allow consumers to directly compare premiums offered by the different brands.

The research reveals that a 45 year old male seeking $500,000 life insurance could pay premiums ranging from $41.00 to $132.43 per month, amounting to a difference of over $1000 annually.

“Interestingly, the research highlights that one insurer, owned by one of the four big banks have significantly reduced the premiums on their retail life insurance products from the 2015 data. The research confirms findings from 2015, that on average Direct life insurance policies are significantly more expensive than Retail policies,” Mr Cain said.

Mr Cain urges Australian families to do their research as life insurance premiums and policy benefits can vary dramatically between brands and distribution channels: “To avoid being overcharged on your life insurance premiums, be informed and shop around before you make a decision.”

Click here to view the 2016 Life Insurance Direct Quote Index.

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Russell Cain

Data collected over a three-year period by lifeinsurancedirect.com.au suggests that it’s now harder to get all forms of life insurance – life, income protection, trauma and total and permanent disability (TPD) – than it has been in the past.

LifeInsuranceDirect observed that in the period July-December 2012, the overall success rate for people applying for life insurance (insurability) was around 80 (80.04) per cent.

In the January-June 2015 period, insurability had dropped to almost 76 (75.85) per cent. “What the numbers tell us is that people are less insurable now than they used to be,” says LifeInsuranceDirect.com.au CEO Russell Cain. “But the real question is – why?”

The answer, he says, may lie in technology. “We are not underwriters, but what we have noticed is that, over time, life insurers have embraced the use of electronic applications and electronic applications make it quick and easy for insurers to detect certain risk factors and reject people on the basis of those risks. If, for example, the person applying for insurance has a certain pre-existing condition the computer can automatically reject the application. It’s just a simple matter of programming.”

Increasing claims may also be a factor. “We have observed that more people are being paid claims on insurance policies than in the past and we assume that’s been affecting the insurers’ bottom line. We therefore believe insurers and reinsurers have been tightening their guidelines around who they will and will not insure and technology makes this decision easier for them,” Mr Cain said. “What all this means in plain English is that we believe insurers are looking more closely at your health, occupation and pastimes before they agree to insure you.”

The disappointing reality of this Mr Cain said, “Is that while most industries are using technology and data to deliver more value to customers, life insurers and banks seem to be using it to grow their own profits.”

However, there is some good news and that is that insurability overall is reasonably high. “The overall success rate is around 78 (78.22) per cent, which suggests that most of us can get life insurance if we want it,” Mr Cain said. Lifeinsurancedirect.com.au has written a white paper on insurability – Will you be accepted?: Three years of statistics.

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Russell Cain

The recent reporting season has revealed that, despite crying poor, life insurers’ profits are still increasing, according to lifeinsurancedirect.com.au.

LifeInsuranceDirect.com.au CEO Russell Cain said, “AMP reported one of the highest increases in profit – a 33% rise in statutory net profits, as at 20 August – and they’re not alone.”

The reported profits of some of the top life insurers appear below.

• AMP – posted a 12 per cent rise in first-half underlying profit to $570 million. Reported a 33 per cent rise in statutory net profits to $507 million from $382 million in the year-earlier period. As at 20 August, 2015.
• TAL – Financial results released by TAL’s Japanese parent, Dai-ichi Life, reflect that TAL’s premium income was up 21% to $2,234.9 million and underlying profit after tax rose 12% to $146.6 million. TAL’s embedded value grew by 32% to $2,584 million over the financial year. As at 19 May, 2015.
• ClearView – Posted a 4 per cent rise in underlying profits to $20.5 million for fiscal 2015. Although it reported a 10 per cent drop in reported net profit to $12.5 million due to amortisation of intangibles and integration costs associated with financial advice group Matrix’s merger into the company. As at 26 August 2015
• ANZ – Statutory profit after tax of $3.5 billion up 3%. Cash profit of $3.7 billion up 5%. Profit before provisions (PBP) up 4%. As at 5 May 2015

“Consumers should rightfully be asking how life insurers can say they are increasing life insurance premiums because their businesses are not sustainable, when their own evidence clearly shows they continue to make substantial profits,” Mr Cain said.

If sustainability is of such serious concern to life insurers, Mr Cain argues there is much more they could be doing to maintain, or further increase, profits than increasing premiums and pushing for commissions paid to financial advisers to be slashed.

“If life insurers do have a sustainability problem, then the onus should be on them to solve that problem,” he said. “Amongst other things, they could be innovating on product design and lobbying the government to ensure that things like stamp duty are removed from life insurance to make it more affordable,” he said.

LifeInsuranceDirect.com.au has produced a paper, ‘Why do your life insurance premiums keep going up?’ The paper is available here.

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Russell Cain

LifeInsuranceDirect.com.au is questioning whether the current spike in premiums on life insurance offered by insurers to consumers via financial advisers amounts to price gouging.

“We have received letters from a number of top insurers, some of them indicating premium price rises of up to 20 per cent,” said lifeinsurancedirect.com.au CEO, Russell Cain. “All of these insurers cite sustainability as the reason behind the price hike.”

But Mr Cain said the price increases, which will make it more expensive for consumers to buy life insurance via advisers, comes at a time when large insurers are campaigning to slash commissions paid to advisers.

“Logically, lower commissions should mean cheaper premiums for consumers, not more expensive ones,” Mr Cain said. “However indicators from insurers are that prices will continue to rise. This leads us to question whether life insurers are price-gouging.”

Lower commissions will mean distribution costs for insurers will dramatically reduce, while premium price rises mean their revenue will dramatically increase. “Together, all this does is improve the insurer’s bottom line,” Mr Cain said. “It’s certainly not in the best interests of consumers and neither does it help maintain the sustainability of the thousands of small financial advice businesses who provide the real human connection that clients and claimants so desperately need.”

Ultimately, Mr Cain said consumers will have reduced access to advice, less product choice and higher life insurance costs.

“We believe this is an attempt by some of the insurers, many of whom are owned by the major banks, to continue to push consumers into their own direct products,” he said.

In June, lifeinsurancedirect.com.au released data which revealed that direct life insurance policies are usually more expensive than those offered via financial advisers. “Consumers who buy direct policies may pay as much as 100% or more for life insurance products than those who take up policies offered via advisers,” Mr Cain said.

If commissions are reduced as proposed and prices keep rising as forecast, Mr Cain fears more advisers will exit the life insurance industry.

“Fewer advisers will translate to fewer life insurance options for consumers which can only increase Australia’s billion-dollar underinsurance problem,” he said. “Surely any changes as wide reaching as the ones proposed should help prices go down and make life insurance for the consumer – who isn’t paid a life insurance or bank executive’s salary – more affordable.”

To help consumers make better-informed choices about life insurance, lifeinsurancedirect.com.au created the Life Insurance Direct Quote Index that allows Australians to directly compare the cost of various types of life insurance policies.

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