While there is an “overwhelming trend” for insurers to increase premiums, AMP chief executive officer Craig Meller says the life insurance reforms may put an end to that trend.
Speaking to Risk Adviser following the release of AMP’s half-year results – which saw AMP's wealth protection division grow by 9 per cent to $99 million for the period ending 30 June 2015 – Mr Meller said the proposed changes to the life insurance industry would “essentially restore lost profitability in the industry”.
“I think if you look holistically across the marketplace over the last couple of years, I haven’t seen any insurers putting their prices down [and] I think the overwhelming trend is for increased pricing,” he said.
“What we are hoping is that these changes will put a stop to the need for that increased pricing.
“The industry typically under the current upfront model sets a price for an insurance policy on the basis that it is going to last someone between seven and 10 years,” he said.
“If that policy is going to be cancelled off after two or three years then the life insurance company is losing a fortune on it.”
Mr Meller, speaking during the presentation of the company’s half-year results, said that with the improved performance of AMP’s wealth protection business the company has had no “out of annual cycle increases in premiums”.
“[Also] we have no further increases [planned],” Mr Meller said.
“Whether over time the economics of the protection business allow us to bring prices back down, time will tell.”
“That would be our ambition for the industry as a whole over time with the changes that are due to come into force next year,” he said.
Prior to the announcement of the Life Insurance Framework on 25 June 2015, AMP was the first of the life insurance product manufacturers to mandate a change in remuneration models its advisers use for all risk advice.
Mr Meller has previously told Risk Adviser that the industry will eventually move to fee-for-service risk advice in the near future.