Insurer new business to plunge further

The data from DEXX&R revealed that new business growth for life companies that offered more generous disability income benefits could be significantly impacted by the APRA changes, which impose a number of restrictions on policy design including capping monthly benefits to $30,000 and widening occupation definitions for longer claims.

“Based on data provided to DEXX&R, monthly benefits in excess of $10,000 per month represented 12 per cent of new premiums,” the group said. 

“Reducing the maximum monthly benefit to $30,000 per month could reduce new premium received by life companies that cater for monthly benefits over $30,000 by an estimated 5 per cent.”

Overall gross new business premiums for income protection products were also expected to drop by 15 per cent as a result of the changes, the firm said.

“This 15 per cent decrease includes allowance for a maximum monthly benefit of $30,000 eliminating premium inflow that is currently sourced from policies with higher monthly sums insured, and lower premiums applicable to these new generation products,” DEXX&R said.

However, DEXX&R predicted policy discontinuances would fall as a result of the APRA reforms and the less generous benefits offered on new policies, which would offset lower premium inflows over time. 

The research firm also warned premiums for in-force business were likely to increase over the next 18 months due to the current adverse claims experience for life insurers.

The news comes as the most recent APRA statistics reported a fall in life insurer revenue of around 57 per cent, with a moderate improvement in income protection as the first round of product intervention changes came into effect.