A lot of advisers do not like Total and Permanent Disablement Cover (sometimes called Lump Sum Disablement). Academics and risk specialists, backed up by a lot of advisers more used to the Australian environment, think TPD is a product that should be sold more. A quick look at the industry data tells us a couple of things:
not enough information is shared about TPD claims to enable a reasonable assessment to be made
the advisers critical of TPD are therefore probably right to shun it
An adviser asked us recently to tell them how many TPD claims are paid each year. Unfortunately that data isn't shared in the annual public data offered by the FSC. What is shared is a category that includes both "Claims and Expiries." For rate-for-age term the proportion of "expiries" will be low, for TPD with a typical expiry age of 65 it will be high, whereas rate-for-age life does not expire.
Looking at the quarterly public data we can see the amount of benefit payments. At just over $3 million for the most recent quarter you can begin to estimate the claims rates. Link.
Assuming something like the smallest plausible sum insured, $50k per policy (to be as generous as possible on claim rates) you get to about 60 claims a quarter, say 240 a year. With just over 66,000 benefits in-force at the end of Q3 2015 (link) the rate of claims as a proportion of all in-force (a crude measure, I know) is about .36%. For life cover the equivalent numbers are 1,596 "Claims and expiries" in the quarter, giving a rough annual rate of 6,384, with 1.094 million in-force contracts. A much higher rough rate of claim.
The solution for insurers who would like to sell more TPD is therefore obvious. Convincing advisers and consumers that they can rely on the circumstances in which they will out depends on sharing a lot more claims data. Do that and you can probably sell a lot more of the stuff.
The most interesting change in the overall package is a new discount structure. An old discount structure mainly focused on income protection and mortgage protection benefits has been removed and a new variable discount structure of up to 12.5% has been implemented covering life plus Trauma, Income Protection, Health, and TPD. This probably provides more incentive to broaden the cover base for a client across a range of covers, and offers at least some discount to those that choose not to take Income Protection, which is a substantial majority, sadly.
Other pricing news
the policy fee (on which no commissionis paid) has been increased from $6.95 to $7.95.
the base rate table for Income Protection mortgage cover has changed
We will review the full impact of the pricing changes in the premium comparison tool for insurers. The pricing will be live on the 12th of October on Quotemonster.
New Product Names
AIA will be renaming product set to REAL before each product name. e.g. REAL Life Cover, REAL Trauma Cover. The Product naming will be launched 30 September and rolled out over time
New Health Product: REAL Health
AIA is launching a new Health Product called REAL Health
Premiums are calculated on a Yearly Renewable Term based on Age, Gender and Smoker status.
Individual premiums apply for each Life Assured, including for each child. A dependent Child will become subject to adult Premium rates on the next Policy anniversary date after they each age twenty one (21).
Pre-launch and Enhancement of Product: Loss of Earnings Premier
‘Premier Income Protection’ is being re-launched as ‘REAL Loss of Earnings Premier’
Product has been enhanced:
Enhanced pre and post disability income wordings
Added Optional Involuntary Redundancy benefit
Total and Permanent Disability Cover Personal
New to age 70 option
Quote either to age 65 or to age 70
from age 66 – 70 definition based on activities of daily living
New Special Events Increase option for Residential investment properties
Total and Permanent Disability Cover - Business
New to age 70 option
Quote either to age 65 or to age 70
from age 66– 70 definition based on activities of daily living
Life Cover – Level 15/80
Allow accelerated Trauma & TPD with Level 15/80 Life Cover.
Mortgage, Income and Rent Cover
Optional CPI added to all options
AV, Indemnity, LOE Premier • Optional involuntary redundancy benefit for IP AV, Indemnity, LOE Premier – New benefit
6mth benefit period
6mth stand down period from Policy Commencement Date
Payable after 30 days of unemployment
$2,500 or your sum assured whichever the lesser
Trauma - Personal
New inbuilt children’s trauma benefit
20% of Life assureds Sum Insured up to $50,000 whichever is the lesser.
Keep current optional benefit - $75,000 / flat fee
Change ‘Optional’ to ‘Top Up’
If top up benefit selected $75k is in addition to the in-built portion - maximum benefit of $125,000.
Added conversion option for children turning 21
All the product changes are being rated and will be reflected in AIA product ratings from 12 October.
Following on from yesterdays post - the top five weighted items for TPD insurance are:
TPD Main Cover Definition
Benefit Definition over 65
Special Events Increase
There are no major tracked differences for partial TPD benefits - where a partial benefit is present the definition is one limb or one eye. The weight of the item in total scoring is about 25%, depending on the amount offered. These range from 10% of sum insured to a maximum of $25,000 to 25% of sum insured to a maximum of $75,000. It is the single biggest differentiating factor between the different providers.
Some of you may have found when you’re preparing an illustration for a client with different occupation classes for TPD and Income Protection that the premiums generated in QuoteMonster don’t match those in other insurers quote software. This may be giving you and your clients the impression that premiums are higher, or lower, than they actually are. The companies we often have queries about are AMP Lifetrack, AMP RPP, Asteron Life and Fidelity Life.
However, this can be easily changed in QuoteMonster by doing the following:
When you’re entering in your client’s personal details in Step 1, click on the “Advanced” button next to Occupation. This will then open the “Advanced Occupation Settings” screen.
Next to the list of insurance providers, you’ll see dropdown menus for each benefit’s occupation class. Simply change the occupation class on each benefit to match the occupation classes showing in the insurers quote software, then save and close. You can then continue with the quote in QuoteMonster as normal.
As the change will only apply to that particular illustration, these steps will need to be repeated in QuoteMonster each time you are quoting for different TPD and IP occupation classes.
And of course we are here to help you if you have any questions.