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Premium rates for life cover sold by advisers in decline

Source: Money Management: 26 Oct 2012

Premium rates for life cover products sold by financial advisers fell by an average of 10 per cent across 11 leading insurance providers between December 2004 and June 2012, according to a joint study by Clearview and Plan For Life.



With the premium averaged across four ages (35, 40, 45 and 50 next birthday) and three sum-insured amounts ($250,000, $500,000 and $1 million), one insurer recorded as much as a 23 per cent decline in average rates for a male non smoker, while only one showed an increase in average rates (by 2 per cent).



The report also found for the same cover there was a 16 per cent fall in the highest average premium charged in 2012 compared to 2004.



Since 2004, the difference between the cheapest and most experienced product, for equivalent cover, could be as much as 30 per cent in some years. Since 2011, this gap has decreased to about 14 per cent, the report found.



"The falls can be partly attributed to improving mortality rates over time," Clearview head of product and underwriting Clive Levinthal said.



"However, I believe the main driver is margin squeeze caused by competition from good broking activity by independent advisers."

Money Management

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Insurance Deductible:
the amount that an insured is required to contribute toward an insurance claim as stipulated in an insurance policy. Otherwise known as the "policy excess".