Life insurer performance continues to plummet

According to APRA’s latest statistics, total revenue across the life insurance sector for the year to June 2020 was $15.9 billion, down 55 per cent from $35.6 billion the previous year.

Net policy revenue also declined 9.2 per cent from $16.4 billion in the 2019 financial year to $14.9 billion in the 2020 year.

The industry made a net loss after tax of $1.6 billion over the 12 months to June, a “significant reduction” from the previous year’s $438 million profit, APRA said.

“This deterioration was caused by poor results in both the December and March quarters,” the regulator stated.

Risk products accounted for the bulk of this deterioration, recording a combined after-tax loss of $1.4 billion in the year to June, according to the data.

“Performance of all risk products deteriorated over the year apart from individual lump sum [products],” APRA said. 

“In particular, individual disability income insurance (also known as income protection insurance) reported a substantial loss, primarily driven by loss recognition as adverse claims experience persists.”

Looking at quarterly statistics, life insurers also saw a 6.2 per cent decline in net policy revenue from the March 2020 quarter to the June 2020 quarter.

Income protection products alone saw a $179 million loss in the June quarter, the data revealed.

Commenting on the results, FSC senior policy manager of life insurance Nick Kirwan said the performance of income protection products was likely to worsen further in coming months.

“These income protection losses were driven by a surge in the number and duration of claims, especially for mental health conditions,” Mr Kirwan said. 

“We expect mental health claims to increase in the months and years ahead from the effects of the COVID-19 pandemic, exacerbating people’s isolation and financial hardship.”

However, he added that life insurers would look to refresh income protection policies in the long term with a focus on “the three A’s” - availability, affordability and assurance.

“Expect to see this new generation of more sustainable income protection policies becoming available in the next year or so,” Mr Kirwan said.