Life/risk discontinuances rarely less than 11 per cent
Specialist research house Dexx&r has provided new analysis which suggests that one of the key factors funnelling into the calculation of "churn", discontinuances, has never sat at zero and probably never will.
In an analysis released this week Dexx&r has pointed out that the level of discontinuances in the Australian life insurance sector actually fluctuates from a low of 11 per cent to a 16 per cent in four and five year cycles and it has based its findings based on data stretching back to 1985.
The Dexx&r analysis has come as the Life Insurance and Advice Working Group being chaired by John Trowbridge prepares to release its final recommendations later this month.
Pointing to the fluctuations occurring in the market, the Dexx&r research said that Individual Lump Sum Discontinuances had increased each year since 2010 and peaked in December 2012 at 15.9 per cent while in the 12 months to December 2014 the attrition rate fell to 15.4 per cent.
The company's analysis said that discontinuance rates were influenced by economic conditions and the demographic profile of a life company's in-force book.
"Older policyholders are more likely to discontinue or reduce cover as premiums increase with age and their need for cover reduces," it said.
However it also noted the degree to which the cycle was influenced by "the extent to which insurers migrate policyholders from older legacy products into current products and adviser replacement activity that is in a client's best interest, and also that which may not be in the client's best interest".
"For these reasons discontinuances are never zero and over the long term Lump Sum Attrition Rates vary between a low of 11 per cent and 16 per cent," the Dexx&r analysis said.
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