Across the industry, there have been significant reductions in the amount of cover and associated annual premiums for group super business, resulting from the PYS (Protecting Your Super) and PMIF (Putting Members Interests First) legislation.
Between June 2019 and June 2020, insured lives for death and TPD reduced by approximately 30%, after having remained stable since June 2018. Most of this reduction is likely to be the result of PYS. DII (Disability Income Insurance) suffered less reduction, due to the lower proportions of default DII in the industry.
Over the same period, total annual premiums for death cover reduced in line with lives insured, but TPD premiums reduced by only 3.2% (compared to 30% mentioned above). In other words, TPD premium rates per life insured increased by approximately 40%, which offset the reduction that might otherwise have occurred. Premium rates per life insured for DII risks increased by approximately 6%, but we are expecting further increases.
The general reduction in annual premiums resulting from new legislation was expected to place upwards pressure on premium rates, due to the insurers’ needs to service capital and fixed costs from a lower premium base. In addition, 2018-2020 saw a general increasing trend in disability income claims and TPD claims for mental health, which will potentially be exacerbated by the economic and social aspects of the COVID-19 pandemic, so it is likely we will see rising premiums over the next year.
Please find a condensed version of our insurance market report below: