Merc repositions risk business
Mercantile Mutual has repositioned its full suite of risk products to reflect changing market conditions.
Under the repositioning, Merc has restructured its income protection products and has made slight changes to its total and permanent disability (TPD) and trauma range.
Income protection policies will now be broken down into two product streams. Merc will offer indemnity style products for the first time. A number of other life insurance groups have launched indemnity style products over the past year in an effort to stamp out the profitability problems which have plagued income protection product providers over the past few years. Agreed value products have dominated the market for the past decade and are one of the factors regularly singled out as a contributor to falls in profits.
Most of these indemnity products have stripped many of the features of the products to offer a simple, low cost income protection product. On the other hand, Merc's new indemnity products will continue to offer the same features as their other agreed value products.
Alongside the indemnity style products, Merc has also launched an agreed value product that guarantees to pay the sum insured on claim.
Mercantile Mutual Life Insurance general manager Martin Mulcare says the new agreed value products will require much more documentation of a client's income at the time of underwriting.
"The requirement for more evidence of income at the time of underwriting will create more work for advisers and clients but at the end of the day they will be sure of the amount they receive should they need to claim," he says.
Mulcare says Merc will be investing more resources in the underwriting side of the business to ensure documentation fits the new requirements.
While agreed value policies have been part of the profitability problem with income protection products, the increasing incidence of depression and stress related claims.
Mulcare says other life insurers have limited the amount of time clients can stay on benefits if their sickness is stress and depression related. Merc has kept the unlimited claim time for these illnesses open ended but has pushed up the premiums for protection against these types of illnesses. If you choose to limit your claim time to 12 months, you will receive a 15 per cent discount on premiums.
Payments of claims for a full lifetime has been another source of profit leakage for life insurers. In response to this issue, Merc has included payment of superannuation contributions as a part of the claim. This extra amount will be paid directly to the client's superannuation fund while they are on claim.
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