Suncorp's life insurance business, Asteron Life, will not increase premium rates on newly written business by advisers from 1 July 2016 when the clawback policy comes into effect.
The insurer's decision to hold premiums follows the recent announcement by Assistant Treasurer and Minister for Small Business Kelly O'Dwyer that the proposed three-year clawback policy in the Life Insurance Framework had been reduced to two years.
Commenting on the decision, Asteron executive manager Mark Vilo said this “early promise” is a direct response to adviser feedback which called for premiums to remain unchanged during the clawback period.
“We’re offering this commitment not to increase premium rates for new policies to help assist with retention of customers in their initial years,” Mr Vilo said.
“We’re promising today not to reprice a new customer during the clawback period of a policy. We know that affordability can often be a key driver for lapses and by making this commitment, advisers can give their clients certainty without the concern of trying to manage a premium increase that wasn’t anticipated.
“We know from our own statistics that around 5.0 per cent of policies lapse in the first year, 12.6 per cent in year two and 12.3 per cent in year three. The top reason cited for lapses is price increases. In simplistic terms, if you had 100 policies in force today, at the end of year five you would only have around 56 policies left. That’s a sustainability challenge we have to work hard to improve.
“The long-term goal for our business is to continue to work to support independent financial advisers, help improve efficiency, and provide relevant products and make changes that ensure a positive outcome for advisers and customers. We believe this is one step towards achieving this,” he said.
Previously speaking to Risk Adviser, Mr Vilo said the life insurer was supportive of the idea of holding off premium hikes during the responsibility period in order to mitigate the possibility of a clients cancelling a policy due to affordability.
Mr Vilo added that there was a "real opportunity" for other insurers to get behind this initiative and support it.