Balancing premiums and claims

ARTICLE

17 January 2023

3 mins read

The increasing cost of providing cover, lower than expected return to work outcomes and the current high inflationary environment has meant that we have adjusted our Priority Protection in-force premiums as part of our regular rate review.

We’ve adjusted our premium rates differently across the various income protection benefit periods and premium types to try and keep increases down as much as possible given the financial pressures we’re all facing. The adjustments include a combination of increases and decreases. The in-force rate adjustments include:

no change to our Lump Sum Life, Crisis Recovery and TPD premium rates or
no change to our Income Protection CORE premium rates,
some decreases to our closed series income protection premium rates for IP with a 1, 2 or 5-year benefit period,
Reluctantly, there are increases to our closed series income protection premium rates for IP with a benefit period to age 65, 70 or lifetime benefits.

What are we doing to manage rate rises and their impact on advisers and customers?

Reviewing and adjusting our premium rates differently across the various benefit periods and premium types to ensure increases are kept to a minimum.
In acknowledging changes to Level premiums brings more challenging conversations, we’ve tried to minimise Level premium increases and have developed a flyer to explain ‘Understanding Level Premiums’. By explaining what can impact level premiums you can help manage clients’ understanding of how level premiums work.
In August 2022 we introduced our Income Protection CORE five-year Premium Rate Guarantee for new business policies, providing you and your clients with peace of mind against a backdrop of rising inflation and cost-of-living pressures.
We continue to innovate through our shared value programs such as AIA Embrace which supports customers with programs and partnerships to support them whether they are well, unwell, or recovering.

What are the adjustments to premium inforce rates?

Paying claims when customers need us most, sustainable product development and supporting clients to live healthier, longer, better lives with programs such as AIA Vitality continues to be our focus. We understand that the current economic conditions continue to be challenging for Australians, and we want to support you in your client conversations to ensure that clients maintain their cover.

In 2021, AIA Australia paid out over $2.1 billion in claims to support clients in their time of need. To ensure we can continue providing clients with quality cover, we’ve made the changes below to our in-force premium rates for Income Protection.

Income Protection (Closed to New Business Series)

These changes apply to legacy Priority Protection Income Protection as shown below;

There is no change to our current on-sale Income Protection CORE premium rates.

For income protection policies issued PP13 through to PP20:

	Stepped Premium	Level Premium
Income Protection (closed to new business series) with a 1, 2, 5 year benefit period	-2.5%	-2.5%
Income Protection (closed to new business series) with a benefit period to the policy anniversary before age 65 or 70	15%	7.5%
Income Protection CORE	No change	No change

For income protection policies issued on PP12 or earlier:

	Stepped Premium	Level Premium
Income Protection (closed to new business series) 1, 2, 5 year benefit period	-2.5%	-2.5%
Income Protection (closed to new business series) to the policy anniversary before age 65, 70 or lifetime benefits	19.5%	10%
Income Protection CORE	No change	No change

The following rate increases will commence from 6 March 2023, impacting your clients’ as they go through their annual policy renewal.

To access our previous Product Disclosure Statements and Policy Documents visit this page.

When will AIAA communicate this news to clients?

Starting 30 January 2023, we will be communicating these changes to clients as their policy anniversary approaches and re-emphasising the role insurance plays in protecting them during their times of need.

Ways to manage affordability conversations

Our commitment to your clients is to be there when they need us. We understand that for many, increases to their premiums may cause them to re-evaluate their cover which may lead to reducing their cover or unfortunately cancelling their policies. Some considerations around reviewing cover may include;

Switch from a ‘to age 65’ or ‘70’* benefit period to a 5-year benefit period

Annual premium savings of up to 50%, across a broad spectrum of age cohorts and occupational categories
Generally, no underwriting involved
The client’s legacy income protection policy series is retained
Statement of Advice/Record of Advice template and compliance documentation available

_{*To age ‘65’ or ‘70’ means to the policy anniversary prior to the life insured turning 65 or 70}

Ensure clients are engaging in AIA Vitality - don’t miss the discounts

When AIA Vitality is attached to your clients’ cover it means the premium discount they receive flexes up or down depending on how they maintain their AIA Vitality status.

PLUS, they receive rewards of up to $760 in e-gift cards or cashback, discounted gym memberships, cashback on eligible Virgin Australia Flights and more.

See how the AIA Vitality discounts work here.

What discounts and rewards are available?

For full details about the discounts available, see the Adviser Guide – Section C.

Bundled discount - Save up to 10%

If your client has a Lump Sum and Income Protection policy with AIAA, they may be eligible to receive a 10% bundled discount on their policies. If clients don’t have an Income Protection policy included, they may be eligible for a lump sum bundled discount of 4% on their lump sum premiums.

AIA Health – Save 5% on Priority Protection policies

Taking out this cover is an excellent way for clients to fulfil their health insurance needs and also receive a discount on their life insurance premiums'.

AIA Vitality – Up to 20% discount, earn up to $760 in rewards, plus more!

AIA Vitality is our science-backed wellbeing program that helps clients improve their health and rewards them for it.

Use AIAA reporting tools to assist with client conversations

Propensity to Lapse reporting – Available from your CDM, this report leverages predictive modelling to identify which of your clients have a high likelihood of lapsing. This tool can help you take a proactive and targeted approach to manage policy renewals with your clients.

Policy Renewal report – Download this report which gives you a snapshot of your clients who have an annual renewal in the next three months. The report shows you what the new premium will be, any changes in discounts such as AIA Vitality, and the premium impact if you change the waiting period, remove CPI increase or add AIA Health.

You can access the report at Adviser Site > Policy Search-Reports > PP Premium Renewal Report

Client email templates - Templates you can use to remind your clients of the features and benefits within their Priority Protection cover, as well as tips to ensure they are maximising the opportunity to live a healthier, longer, better life.

Making policy adjustments

You may wish to discuss alterations to the client’s policy to adjust the premiums:

Decreasing the cover	Review the client’s personal income, expenses or liabilities to see if they have changed.
Change premium structure type	Compare Stepped, Level or Optimum premiums.
Reducing the benefit period	Reduce the benefit period from To Age ‘65’ or ‘70’ˆ to 5 years. Also, discuss if TPD cover could offer a cost-effective alternative for longer term income replacement needs.
Change your waiting periods	Consider an increase to the waiting period particularly if liquid forms of capital are available (leave entitlements, cash reserves etc).
Review type of Income Protection policy	Removing PLUS option or Advantage option or move to Income Protection CORE. Is an Agreed Value contract still warranted?
Removing Automatic Benefit Indexation	Choose to stop this increase for 12 months, or permanently.
Fund by Superannuation	Consider restructuring cover inside superannuation but noting product differences as well as impact on retirement planning and objectives.
Utilising Forward Underwriting Benefit	For lump sum benefits this can maintain the option to increase cover in future for a low cost.
Update your client’s lifestyle choices	Can any loading such as smoking, diet or dangerous hobbies be reviewed if the client s health has improved, or they’ve given up these activities.
Convert your Income Protection cover to Income Protection CORE cover	Do your client’s circumstances allow you to consider converting their legacy Income Protection cover to a current Income Protection CORE option.

ˆ To age ‘65’ or ‘70’ means to the policy anniversary prior to the life insured turning 65 or 70

Consider your clients age and current health condition

Your clients’ age and the likelihood of having to claim can be an important consideration. Our claims brochure outlines our top five claimable events under each cover type along with the gender and average age of an AIA Australia’s client when they claim. These include the average ages of claimants as illustrated below:

If your client’s circumstances still lead to them to reducing or cancelling their policy, having a final health check conducted by their General Practitioner may be a valuable step to take before making the change. By taking this step, your client can be sure that they have no underlying health condition that may result in a claim or impact their ability to get cover in the future prior to reducing or cancelling their cover.

If you’d like further information, please contact your AIAA Client Development Manager or Client Development Associate who can work with our customer retention team on specific client challenges you might have. We appreciate your continued support and value our partnership to help clients lead healthier, longer, better lives.