Insurance chiefs not worried about churn

Life insurance providers are confident churn rates will decline as advisers become more focused on sustainable writing practices.

The more positive outlook on churn came as data from DEXX&R research revealed attrition rates remained high.

AIA Australia chief Damien Green claims the focus has been on sustainability of business practices in the adviser and dealer communities, and making sure policies have not lapsed without legitimate reasons.

“We think there’s still an element of unnecessary churning that goes on, but the majority of advisers do the right thing by their customers and only change policies where it’s clearly in the best interests of their clients and customers,” Green said.

Jordan Hawke, executive general manager of Asteron, said policy churning would remain a challenge as long as providers kept upgrading their products, creating a “perfect storm".

However, Hawke did not believe addressing the practise of churning required Government action, as “self-regulation remains the key”.

DEXX&R revealed lapse rates for life policies were up to 14.69 per cent in March this year, down from 15.21 in June 2009. However, compared to the same time last year, figures have increased by 0.48 per cent and remain high when compared to 2007 and 2008.

DEXX&R research chief Mark Kachor believes a number of factors can facilitate moving business from one company to another, including adviser commissions and availability of takeover terms, but it is difficult to determine levels of policy churning.

AMP head of technical strategies Chris Kirby said any fall in customer retention is a worry to the provider of financial services.

“The key is trying to understand if it’s a one-off event or if it is indicative of a broader trend and what the cause is,” he said.

However, Kirby said he didn’t see the overall figures as a concern, and noted some proposed reforms would indirectly affect the industry in that regard.

“The broader move towards the fee-for-service model will have a very positive effect on customer experience, even in life insurance, although the jury is still out on the issue of insurance and commissions,” he added.

Aviva Group had the biggest increase in lapse rates from June 2009 to March this year, with numbers going up by almost 2.5 percentage points.

In March 2010, AIA Australia had the highest attrition rate, although it reduced its numbers by more than 6 percentage points since June last year.

“I think in time common sense will prevail and the industry is probably closer than ever before to having a common view about the practice of churning,” Green concluded.

Those with the lowest attrition rates were Metlife (5.12), AMP (11.81) and Asteron (12.18).