Australia's major risk insurers have embarked on product innovation in the face of pricing pressure, according to specialist actuarial consultancy, Rice Warner.
Rice Warner consultant, Raymond Chow has used an analysis published by the company to point to the fact that, while annual premium income in Australia's group insurance market has grown over the past year from $4.1 billion to $5.0 billion at 30 June 2014, prices have shown a strong reversal to a downward trend over previous years.
He said this pricing pressure had sparked a revival of insurance product innovation, along with some redesign trends which were beginning to emerge.
Chow wrote that, over the past 12 months, Rice Warner had observed key changes in terms and conditions including increased default coverage either to personal members or high risk occupations, and enhancements to income protection.
He wrote that Rice Warner survey results suggested that the proportion of members in industry and public sector funds with default income protection cover had increased from 43 per cent to 52 per cent over the last year.
As well, funds were changing the default death and TPD cover scale to a ‘life stages' shape, or increasing the default number of units but changing (reducing) the sum insured per unit, as well as tightening definitions and eligibility criteria.
Chow said that the core issue, well documented in the sector, was that prices for the death, TPD and Income Protection product segments had spiked, over the past year by 15 per cent, 26 per cent and 19 per cent respectively, on average, across the market.
"These numbers mask a much larger underlying upward shift in prices," he said. "This is because funds typically review their insurance arrangements only every three years, so only one-third of prices will change in any one year. In fact, over the past year, a handful of funds have more than doubled their insurance premium rates."
