The 2016 Quote Index: What’s New, What’s Different, And What It Means For You

A year goes by so fast, you start conversations with “just the other day”, when in reality it happened over 12 months ago. We understand it’s difficult to keep track of all the changes taking place in just one year. That’s why we want to keep you up-to-date on the latest life policy trends, ensuring you continue to receive value for your money when buying or reviewing your life insurance policy.

We’re pleased to inform you that we’ve finished gathering and compiling the updated research for our Life Insurance Quote index for 2016, which we can now share with you and highlight the changes we observed within the last 12 months.

The purpose of our research was to compare the underlying term life insurance rates for the equivalent sums insured across some of Australia’s largest life insurance brands. We’ve collected data across the 3 primary different distribution channels, in order to help you understand that the underlying insurers have different premium sets for different product offerings and how these have changed since 2015.

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Why this research is important

This research was conducted to assist Australian families in making better informed decisions when looking for affordable life insurance, helping you use your household budget wisely when sourcing protection for you and your family.

A lot of what we do in our daily lives is based on common sense, but sometimes common sense is not the best approach. Moreover, the type of insurance that worked for you previously, might not be the best choice for you now.

Although there are several different ways of obtaining affordable life insurance, there are three main channels when buying life insurance.

  • Firstly by going to the insurer directly
  • Secondly through an adviser or comparison website
  • Thirdly via a group scheme offered by a super fund

It’s important to note that our research focused on the core premium rates of a policy, and did not include any optional health and lifestyle, or customer loyalty discounts associated with the policy. The only exception was ClearView’s life solutions policy, which has a 10% Health Maintenance discount built into the premium amount, making it part of the policy contract and therefore couldn’t be removed.

While we did observe an upward pricing trend in both Income Protection and Total and Permanent Disability cover, this research is limited to term life insurance (Death) benefits only.

Enhancements to our index– we’ve included group policies available through Super Funds

We’ve opted to include Group policies offered by select Superannuation Funds, as Rice Warner’s statistics showed that more than 70% of life insurance policies, that’s 13.5 million separate policies, are held in superannuation funds.

For this reason we decided to include 8 super funds, based on their membership size and their relevance to our customers. Because there are such a large number of super funds currently available, our sample size isn’t large enough to establish a statistically relevant average premium.

The results of our 2016 research can be found here:

quote index 2016
We observed a number of changes in premium rates, since 2015, which have been illustrated in the graph below:

Observations we observed between 2015 and 2016

Price Decreases for Advised Policies

On Average retail policies had a decrease of 1.40% between 2015 and 2016. While most of the changes were less than 1%, AIA, BT and Zurich showed average decreases of 5.29%, 7.20% & 2.62% respectively; these changes are most likely due to a change in the base rate of the premiums. MLC had a large average decrease of 18.32% which was due to a couple of factors.

MLC removed their policy fees from new MLC Insurance policies. Previously, customers had to pay a policy fee of $6.81 which was previously built into the premium of the policy.

  • Up to the age of 35, the removal of the $6.81 policy fee is the only monthly decrease we see, however for ages 40 and above we saw a further reduction in the premiums. This indicates a decrease in the base rate of the premiums for these ages and sums insured.
  • These base rate decreases for those aged 40 and above were often substantial, and the monthly reduction ranged from $1.25 to $167.85 for females and from $1.18 to $294.09 for males.

When last we spoke to MLC they confirmed that they had no future plans to reinstate the $6.81 policy fee.

Price Changes to Direct Policies

On average, direct policy’s increased by 0.62% between 2015 and 2016. While most of the changes were less than 1%, Bank West and ANZ saw average increases of 6.71% and 10.07% respectively; while Insurance Line experienced an average decrease of 11.26%. The Increase to ANZ was likely due to changes in the base rates of the premium.

Bank West’s Classic Life Insurance premiums now start from $15 per month, where previously it started at $9.85 for males and $4.05 for females. Although we were unable to confirm exactly when the new minimum premiums were introduced, the Bank West classic life insurance PDS, dated 15 Nov 2015, indicates this change.

Insurance Line’s Life Insurance Plan experienced changes to the base rate of their premiums and also introduced minimum premium amounts.

  • The base rates had an average premium reduction of $14.04 per month with changes ranging from $+4.61 to $-89.74 for females and from $+13.02 to $-45.77 for males.
  • The Introduction of a minimum premium amounts mean that you’re now unable to take out a policy for a lower sum insured, unless it’s above the minimum premium amount of approximately $22.84 per month.
  • Previously you could obtain these lower sums insured with premiums starting at $10.01 for females and $12.00 for males

Both these changes both occurred sometime during the last 12 months.

Products and Services Discontinued

Westpac Lifetime Protect was discontinued for new businesses. We were unable to confirm with Westpac why or when they made this decision.

Virgin Life Insurance “Quick and Easy” option no longer provides an online quote, however you can still get a quote for their “Tailored” option online.

  • The main differences between the two options are that the “Quick and Easy” option contains extensive exclusions built into the policy, which can be viewed on page 8 and 9 of their product disclosure statement (PDS)
  • The other difference is that “Quick and Easy” only offers a sum insured of up to $750K while the “Tailored” option offers up to $1.5M.
  • As these two options offer different benefits and exclusions within the same product, we were unable to compare their price differences year on year.

New Products: NIB Value Life Insurance

Our 2016 quote index now includes NIB’s value life insurance policy which replaces Westpac’s Lifetime Protect policy. We chose NIB because they are a large health insurance brand who has in recent years partnered with TAL life limited to also offer life insurance.

Health and Lifestyle Optional Discounts

While our research only looked at term life insurance, without any policy discounts included, with the exception of the ClearView Life Solutions policy, we have seen an increase of insurers adding health and lifestyle benefits into their products.

New programs launched:

Select existing health and lifestyle offer and or benefits have also been reinvigorated such as the

Profitability of Life Insurance Companies

The below graph from APRA indicates the profitability of life insurance companies from 2009 to 2015 by depicting their net profit after tax. 2016 data has not yet been made available.

There’s a clear upward trend of profits for life insurers from 2013 onwards. It will be interesting to see if their profitability will impact your premiums and the amount of benefits provided.

RBA

Comparing Direct Policies to Retail Policies

Our Research showed that, on average, direct policies are more expensive than retail policies, i.e. direct policies have higher premiums than Retail policies.

This was the case even when policies revealed to have had the same underlying insurer. For example, TAL Accelerated Protection (retail), Virgin Life Insurance Tailored (direct), Insurance Line Life Insurance Plan (direct), NIB Value Life Insurance (direct) and NRMA Life Insurance Fast Track (direct) all have the same underlying insurer – TAL Life Limited, similarly MLC insurance (retail) & NAB essential (direct) have the same underlying insurer – MLC limited. In both these examples the retail policies are cheaper than the direct policies.

While select insurers may have both direct and retail policies with several different brands, the premiums for each are priced independently.

Conclusion

Our pricing research contains over 6400 data points which has been collected between June 2015 and June 2016 to create our Life Insurance Direct Quote Indexes. We meticulously analysed these data points and presented our observations, in the hopes of empowering you to make better informed decisions.

If you’re in the market for a term life insurance policy or in the process of reviewing your policy it’s vital that you do your research. We want you to be fully informed before making a decision that impacts the financial wellbeing of your family.

Our premium research highlighted that:

  • The distribution channel you choose to use when taking out a policy matters as we saw that generally advised (retail) and group policies are more price competitive than direct policies.
  • Your insurance decision should not be based on brand name alone. Just because a brand is well known, doesn’t mean they offer the best value for money.
  • Don’t base your decision on the underlying insurer or issuer of the policy. Premiums can vary dramatically between their product ranges.

With each new stage of your life your needs and requirements change. Talk to a specialist who has in-depth knowledge of the market and you should review your current policy(s) yearly to insure you’re still receiving the best value for money.

Disclaimer

This pricing research from our Life Insurance Direct Quote Index 2015 and Life Insurance Direct Quote Index 2016 was analysed by Life Insurance Direct Australia Pty Ltd (lifeinsurancedirect.com.au) AFSL 473135. This pricing research contained over 6400 data points. We’re not actuaries, but we’ve analysed our data and we’re presenting our observation of the data over time. This information is general in nature and, because it’s based on our assessment and our experience, it may be different to others’ assessments. While we have exercised reasonable care and diligence in compiling and publishing this information, this research has only been prepared for illustrative purposes. If you identify an error please inform us and we will correct it immediately. To the extent permitted by law, we accept no liability for a third-party’s reliance on this information. This document contains general advice and personal opinions. It is not personal financial product advice and you should not make any decision about financial products in reliance on this document or without considering your own circumstances. Life Insurance Direct Australia is one of Australia’s leading life insurance comparison websites. Although we don’t cover every insurer and every insurance product we do compare a range of major life insurance companies and offer clients comparison reports, education and assistance.

Author: Russell Cain
Published: August 1, 2016

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