A major banking institution has come out in favour of imposing limits on the time during which people can mount claims under their life insurance policies.
Just weeks after TAL chief executive, Jim Minto, canvassed the introduction of such limits ANZ Limited has used its submission to the Financial Systems Inquiry to argue that the life/risk sector should emulate practices in the general insurance sector where "limitation periods for actions commonly apply in areas such as motor accidents, work injuries and victim compensation".
"A similar approach should apply to life insurance; for example, limiting the age of claims to seven years (the applicable period for work injury claims in New South Wales varies with the longest period six years)," the submission said.
Elsewhere in the submission, the ANZ noted that, in recent times, policy lapse rates and premiums had increased.
"High lapse rates place pressure on premiums as the pool of insured persons shrinks. Higher premiums, in turn, reduce affordability, potentially creating an adverse cycle of increasing lapse rates and reduced sustainability," it said.
"Two significant causes of rising premiums are the widening of grounds on which a person may be declared totally and permanently disabled under a policy, and increases in legal actions, particularly in relation to older claims."
The submission said that apparent product complexity and premiums that rise with age also contributed to high lapse rates and that the approach taken by superannuation funds to providing life insurance could be improved to reduce pressure on premiums.
"For example, if more claims data and better information on risks of insured persons were collected and provided by superannuation trustees to insurers, pricing could be assessed more efficiently," it said.
"Insurers, through the operation of the market, have primary responsibility for making changes to meet consumer and superannuation fund requirements. Nevertheless, there are changes to the current rules and approaches that could improve the functioning of the market, affordability and coverage."
