The life insurance industry has seen a continued increase in claims paid for conditions such as cancer, musculoskeletal and mental health conditions. In addition, the low interest rate environment increases the amount insurers need to set aside for future claims. For AIA Australia and other insurers, this has increased the cost of providing insurance.
We continue to look for ways to reduce expenses, manage claims more effectively and introduce new benefits to help our customers live healthier, longer, better lives.
To ensure our products remain sustainable and we’re able to support you (and your family) when you need it most, we reluctantly need to raise some of our premium rates.
Review of Income Protection Premiums
Australian life insurance companies are paying out record numbers of disability claims, including a more than doubling in claim benefits paid for mental illness between 2013 and 2018*.
We’ve experienced a continued increase in income protection claims consistent with the wider industry. One of the biggest factors is that income protection claims are continuing longer than expected. This has a material impact on the overall claims cost. Several factors are driving this but particularly a rising proportion of mental health claims, which typically have a longer than average duration.
The low interest rate environment also means that lower future investment returns are anticipated on reserves, which are the premiums we put aside to pay for future claims. As a result, higher premiums are required to fund the same expected future claims.
*Source: FSC & KPMG 2020
Review of Trauma Cover and Total and Permanent Disability Cover Premiums
We’ve experienced a continued increase in claims consistent with the wider industry. Trauma Cover and TPD Cover claims experience have also been deteriorating over recent years across the industry. Cancer remains the top cause of Trauma claims while mental health, accidents and injury are the top causes of TPD claims.
These factors lead to a need to increase premiums to ensure sustainability, so we can continue to be there for our customers when they need us.
Review of Level Premiums
The low interest rate environment also means that lower future investment returns are anticipated on reserves, which are the premiums we put aside to pay for future claims. As a result, higher premiums are required to fund the same expected future claims.