ClearView to stop sale of agreed value IP contracts

Underlying net profit after tax for ClearView’s life insurance business for the half-year ended 31 December 2019 of $8.7 million, according to a statement to the ASX.

However, that result was adversely impacted by an adverse claims experience of -$4.7 million and an adverse lapse experience of -$1.4 million.

Key contributors to the poor lapse and IP claims experience across the industry, according to ClearView, include poor wages growth, rising consumer costs, step premium rating structures, IP product design issues, societal trends such as mental health and employment trends, and reducing interest rates.

As a result, ClearView said it has already commenced a comprehensive review of its LifeSolutions IP product series with a focus on reviewing product pricing and design.

“As a first step, by 31 March 2020, ClearView will cease the sale of agreed value contracts for IP and in 2H [financial year 2020] will launch a new indemnity type IP product to offer a lower maximum monthly benefit at a competitive premium rate,” it said.

“It is highly likely that further price changes will be made in the coming months to reflect increased claim rates.”

ClearView said the repricing of the product and a detailed review of the claims assumptions are also underway.

It also added that any further increases to the claims assumptions are intended to be recovered through premium rate increases which should sustain profit margins and therefore the underlying embedded value.

“However, while further analysis continues to be undertaken, the revised assumptions are expected to have an upfront adverse impact on the reported incurred claims reserves,” ClearView said.

“The current estimate of the potential impact on the 2H FY20 underlying NPAT in respect to the incurred claims reserves at 31 December 2019 is expected to be between $2 million to $3 million after tax. The repricing is intended to be implemented in 2H FY20.

“A further update on these initiatives will be provided in due course.”

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].