Direct Life Insurance Report 2013

Direct life Insurance market provides challenge and opportunity according to Rice Warner’s latest Direct Life Insurance Market report.

According to Rice Warner’s latest Direct Life Insurance Market Report, Australia’s direct life insurance market has shown significant growth over the last year, with sales increasing by 10.6% and in-force premiums by 13.0%.

At 31 December 2012, direct life insurance constituted 12.0% of the overall risk insurance market compared with 11.9% at 31 December 2011.

However, this masks very different results for the three segments of this market:

• credit related insurance, covering mortgages, loans and credit card debt (in-force premiums up 9.5%)
• funeral insurance (in-force premiums up 14.1%)
• term, income protection and accident insurance (in-force premiums up 15.1%).

Growth in credit related risk insurance compares with unchanged credit card debt and a 6.2% increase in loan and mortgage debt over the year.

Commenting on the results, Richard Weatherhead, Principal and Head of Life Insurance of Rice Warner said:

“The growth of the funeral insurance segment continues to surprise on the up side and reflects distribution initiatives in of new customer segments by some insurers.  Term, income protection and accident insurance business has grown more rapidly than traditional adviser sold and superannuation fund risk insurance in 2012, reflecting increasing consumer confidence in buying risk insurance direct, rather than with advice”.

Despite solid growth in the direct life insurance market overall, many direct life insurance ventures have failed to deliver the anticipated business volumes and others have been closed.  Some insurers have experienced higher lapse rates during the year, but generally this has had less impact than in the adviser market.

Despite the recent risk insurance price increases by many industry superannuation funds, prices are still significantly lower than those for the equivalent direct life product.  Comparisons with adviser sold products can be misleading as adviser products include allowances for the cost of advice (commission).  However, direct life insurance products can sometimes compete with adviser sold products, as demonstrated in Graph 1, which show the range of prices quoted by different insurers, for a woman aged 40 seeking $200,000 of death (life cover) or basic trauma cover. The graph also demonstrates the broad range of prices in the direct market, so wise consumers should ‘shop around’.