Insurance sales crash over 50% in seven years

Addressing the AIOFP conference in Hobart on Wednesday, the insurer’s general manager of retail distribution, Niall McConville, revealed that life insurance new business had plunged from $763 million in 2013 to $325 million in annual sales in 2020.

“This is an important part of the industry if you’re trying to get a lot of momentum in the market and build a brand and you can see how much that has changed in the last few years,” Mr McConville said.

“The market has come off well over 50 per cent.”

A significant part of the drop-off in new sales had been as a result of the banks exiting advice and restrictions around how products could be sold through bank distribution channels, with sales through bank channels dropping from $199 million in 2013 to $9 million in 2020.

“Previously people would go to a financial planner in a bank and they would put some cover in place for them, and you can see that’s pretty much disappeared completely,” Mr McConville said.

“It’s going to be interesting to know where those [customers] are going – are they just self-insuring or just not bothering to take anything out? I would say that’s probably happening with a lot of those clients.”

Sales in the IFA channel had also decreased significantly from $564 million in 2013 to $317 million in 2020, as the life insurance framework regulations made risk advice increasingly uneconomic for many practitioners.

“I would imagine that the new business numbers won’t plateau, and certainly won’t start increasing I don’t think for the next year or so at least, if not longer,” Mr McConville said.

He acknowledged that increasing sustainability issues in the income protection sector, which had seen premiums skyrocket in recent years, had also played a significant role in clients being reluctant to take out or renew insurance cover.

“Income protection has been the product that has been causing a lot of problems in the industry – it certainly has meant that many of you have been having very uncomfortable conversations with your clients,” Mr McConville said.

“The average sum insured we’re paying out is getting larger on income protection – about 20 per cent of the people we pay claims to have changed occupations since we underwrote them.

“Most of them would be in a more dangerous occupation than they were when we underwrote them, and they’re earning substantially less money when they got sick than they were under agreed value, so why would they go back to work.

“We’re also paying longer claims – from a mental health point of view they are 11-15 per cent of our new claims, and they are 25 per cent of people claiming for over nine months.”