Warning on group insurance price pressures
Some group insurance providers have pitched their pricing too low in pursuit of mandates - with the result that pricing is now under pressure and losses are being incurred, according to TAL chief executive Jim Minto.
Pointing to recent Australian Prudential Regulation Authority (APRA) data as well as a new report from actuarial consultancy Rice Warner, Minto said that superannuation fund members were now beginning to be impacted by premium increases.
"Fund members are starting to see premiums increase for the first time in a number of years," he said. "We expect that many funds will increase their prices over the next two years, as insurers respond to heavier numbers and values of claims being reported across all types of benefits, including death and disability."
Minto acknowledged that APRA had expressed concern about the sustainability of pricing in the wholesale life insurance market, and noted that public disclosures by most insurers and reinsurers had revealed adverse claims experience in the group market.
"Pricing was more sustainable pre-GFC, but in recent years the industry has experienced a significant increase - especially in disability-related income protection claims, often stress related," he said.
Minto suggested that while life insurers and the superannuation industry were working together to review strategies and coverage levels to create more sustainable and stable pricing, this might require more frequent reviews of cover limits and benefits.
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