18 May 2018

Andrew Albury

Director - Wealth Management

If you’ve experienced a substantial increase in your personal risk insurance premiums in recent times, you’re not alone. Between 2010 and 2017, premiums rose a staggering 54.6%. Last year, they rose 4.84%, meaning the average cost of a family’s insurance policy will be approximately $200 more and likely to be much higher for professionals with significant levels of cover. With rising premiums, many policyholders are reconsidering their need for personal risk policies. However, two new potentially game-changing opportunities have recently become available in Australia that are set to shake up the Australian Life Risk market by introducing high-quality products and high probabilities of lower premiums.

 

Why have premiums risen so much?

There are a number of factors that have influenced the rise in premiums over recent years. A common challenge for many Australian life risk insurers at present is their inability to deliver true innovation for their clients due to the burden of complex legacy systems; a result of past mergers and acquisitions. They are also suffering under the financial burdens of increased hospital, medical and healthcare related expenses as well as significant increases in claims leading to reduced investment pools and consequently, to the need to continuously increase premiums.

 

A refreshed focus

One of the newest challengers in today’s Australian life risk market was founded in an effort to set a new standard for Australian life insurance. Starting on a clean slate with no legacy issues limiting innovation and progress, this new entrant strives to provide sharper, fairer and more accurate pricing for Australians. One of the key benefits this opportunity presents is that it offers base premium rates guaranteed not to increase for three years from plan commencement as well as a premium discount that applies to lump sum covers if the insured person meets the following:

  • A BMI less than 28.5
  • A non-smoker for more than three years
  • Has no loadings or exclusions

 

Founded by professionals, for professionals

In 1941, the innovative vision of eight dentists in South Africa paved the way for what has become the largest multidisciplinary group of professionals globally. These eight dentists simply wanted a more effective system of financial protection for when they were unable to practice due to sickness or injury. Inspired by similar systems in the UK, they developed a member-focused business model, one in which the objectives perfectly matched their own with specialised insurance products.

This opportunity is unique in that it focuses solely on professionals. Membership is strictly limited to a defined group of thirteen Australian professions and members receive exclusive access to a unique and tailor-made portfolio of insurance benefits. These select professions are within the Medical, Commercial & Legal, and Industrial sectors. Members have the choice for their benefits to increase in line with professionals’ salaries, rather than increasing in line with inflation as is normally the case with Australian life risk companies. Another differentiating factor is that the insurance business is structured as a mutual and is therefore owned by its members. By purchasing life, disability, trauma, income protection or business expenses insurances, one becomes a member of the mutual and can share in the profits generated.

 

But do I really need cover?

Everyone’s circumstances are different and it is advised you take some time to understand the nature and level of risk associated with each area of your life – your income, your business, your investments and your health. Unless you are financially independent (that is, you are not reliant on your ability to work in order to support your family), and you are willing to give up your current lifestyle should you become incapacitated in any way, then yes, some form of personal risk cover should be in place.

Determining how much cover you need will depend on many factors, such as your level of debt, essential expenses and any additional outgoings that would be required to maintain your current lifestyle, including private education fees, private health insurance or holiday expenses.

 

Where can I find out more?

While these new entrants in the insurance marketplace will be important additions to our dynamic, evolving and, at times, challenging life risk market, it is important to remember they are no panacea. Everyone’s circumstances are different and each risk protection strategy and solution needs to be individually assessed. However, it is certainly worthwhile for all existing policyholders to review and compare their insurance strategies and for all those without existing policies in place to consider their options.

MGD is one of only a handful of accredited financial firms in Queensland eligible to give advice on these products. If you, a friend or a professional colleague would like to discuss this opportunity, or your life risk strategy more broadly, please do not hesitate to get in touch.

Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.