Tower bumps up disability premiums
Tower Life has bumped up its disability income insurance premiums by up to 39 per cent in a move it says is designed to ensure it is not caught out by the changing nature of claims.
The premium increases will apply to all products in the disability income and business expense range.
Tower Life strategy manager risk business Ron Williamson says the industry has been concerned for some time about the unprofitable nature of disability income products.
"We have resisted increasing our rates for as long as possible and fully understand the impact this has on consumers and advisers," Williamson says.
"But it must be said that ignoring an unprofitable product line is unsound business practice in any industry and Tower is not about to do that," he says.
Williamson says the rate increases are only one part of an overall strategy to reverse the industry trend. Other elements of the strategy include a strong focus on disability claims management, and revisiting their disability product portfolio.
Rice Kachor Research executive director Mark Kachor says although the sudden increase in rates by Tower may well be high, increases in rates are very common.
Kachor says life companies have been increasing their rates for the past three years. He says claims have also risen considerably in the past five years.
"Over the past five years most companies reduced rates and improved policy conditions," Kachor says.
"Companies that have followed this trend now have no option but to increase rates."
Kachor says the reaction of most companies has been to increase premium rates on their agreed value policies and to release lower cost indemnity policies.
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