Life business unscathed despite LIF
DEXX&R figures reveal the life industry individual risk sales rebounded over the 12 months to March 2017, indicating advice practices have not yet felt the brunt of the Life Insurance Framework (LIF) due to come into effect in January 2018.
The DEXX&R Life Analysis Report revealed that in the individual lump sum risk space, new premiums for individual lump sum risk in the year to March 2017 for individual death, total and permanent disablement (TPD) and trauma business had increased by 2.2 per cent per annum, after two consecutive years of decreases.
The industry wrote $1.33 billion of lump sum new business in the 12 months ending March 2017, up from $1.3 billion recorded in the year to March 2016.
Five of the top 10 life companies, Zurich, TAL, MLC, Clearview, and AIA recorded an increase in lump sum new business for the year ending March 2017.
Zurich’s acquisition of Macquarie Life’s risk business saw the firm recording a 109.1 per cent increase in new business in the 12 months to March 2017.
While the March quarter new business would typically be the lowest recorded in the year, March 2017 also recorded an increase over the same quarter in 2016, which indicated there was a strong basis for continued growth in lump sum business during 2017.
The quarter’s new business of $307 million was up $29 million or 10.4 per cent, on the $278 million new business during the same quarter in 2016.
In terms of individual lump sum discontinuances, the report showed the attrition rate had decreased in each of the four years since March 2013, when the rate peaked at 15.9 per cent. At March 2017, the figure had fallen to 13.6 per cent.
“The continued improvement in retention rates will have a positive impact on life company profitability,” the report said.
Disability income new business shot up by 5.9 per cent to $518 million over the year to March 2017, up from $489 million recorded in the 12 months to March 2016.
Five of the top 10 companies recorded an increase in disability income new business over the 12 months to March, with ClearView recording a 41 per cent increase to $19 million. Westpac recorded an increase of 16 per cent to $69 million, TAL an increase of 11 per cent to $81 million and AIA Australia an increase of eight per cent to $30 million.
Zurich (including Macquarie Life risk inflows) recorded a 123 per cent increase to $53 million.
Disability income discontinuances decreased for the fifth consecutive year from 13.9 per cent at March 2016 to 13.6 per cent at March 2017, similar to March 2009 levels.
“The continued fall in lump sum and disability discontinuance rates during both periods of growth and flat or falling sales indicates that the industry is improving retention with a commensurate improvement in profitability,” the report said.
AUTHOR
Malavika Santhebennur
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