Disability Income The Price is Not Right. Nor is the Product.

Transcription

1 Disability Income The Price is Not Right. Nor is the Product. Note: This pack was used for 2 March & 3 March sessions, and has a few updates from the pack used on 17 February. 17 February, 2 March, 3 March 2015 Brad Louis, Wallace Lee, Alex Threlfall, Graham Kelly

2 Agenda Where is The Industry At Today? Insights DI product a new direction Barriers to action Q & A Brad Wallace Alex Brad, Graham All 2

3 Where is the industry at today? 200 Industry Quarterly Profit for Retail DI $m Profit (after tax) Mar 2009 Sep 2009 Mar 2010 Sep 2010 Mar 2011 Sep 2011 Mar 2012 Sep 2012 Mar 2013 Sep 2013 Mar 2014 Sep 2014 Source: APRA Quarterly Life Insurance Performance 3

4 Where is the industry at today? 140 Retail DI New Business Premiums Rate Changes Source: Rice Warner 4

5 Where is the industry at today? 140 Retail DI New Business Premiums Rate Changes Source: Rice Warner 5

6 Where is the industry at today? 10 Restrictive Product Changes

7 Where is the industry at today? 20% Industry Rolling Annual Profit Margin for Retail DI 15% 10% Desired New Business Profit Margin 5% 0% Profit Margin (after tax) -5% -10% New Business Profit Margin -15% -20% -25% Mar 2009 Sep 2009 Mar 2010 Sep 2010 Mar 2011 Sep 2011 Mar 2012 Sep 2012 Mar 2013 Sep 2013 Mar 2014 Sep 2014 Source: APRA Quarterly Life Insurance Performance 7

8 Where is the industry at today? Target Loss Ratio 50% Target Loss Ratio 45% 8

9 MRA INSIGHTS

10 A:E (100% IAD) Insights from IAD 89-93? 180% Incidence by Disability Age 160% 140% 120% 100% 80% 60% Disability Age 10

11 Foundation of the MRA Table MRA Investigation Drivers Covers 70% of the market 10 year analysis Credible data volumes 19,321 incidences & 15,616 terminations Age (& Claim duration) Claim cause Waiting period Occupation Gender Others 11

12 A:E (MRA Table except Pol Dur.) INSIGHT 1: Sickness incidence increases by policy duration 200% Policy Duration - Sickness (no.) 150% 100% 50% Policy Duration (Years) 12

13 A:E (MRA Table except Pol Dur.) INSIGHT 1: Sickness incidence increases by policy duration 200% Policy Duration - Sickness (amt) 150% 100% 50% Policy Duration (Years) 13

14 A:E (MRA Table) INSIGHT 2: Accident incidence increasing 160% Accident by Year 140% 120% 100% 80% 60% 40%

15 A:E (MRA Table) INSIGHT 3: No systemic change in termination experience 175% Year 1 Claim Duration by Year 150% 125% 100% 75% 50%

16 A:E (MRA Table) INSIGHT 3: No systemic change in termination experience 200% 175% 150% 125% 100% 75% 50% 25% Year 2 Claim Duration by Year 0%

17 DI PRODUCT A NEW DIRECTION

18 Opportunity in the disability market Language Value proposition 35% reduction in claim costs Policy terms 18

19 BARRIERS TO ACTION

20 A 20%-35% Price Rise Is Not A (Big) Surprise Changes Since 2008 We ve Known About Product Enhancements Underwriting Improvements Changes Since 2008 We May Not Have Known Accident Trends Duration Trends Interest Rate Movements 20

21 6 Barriers to Action? Barriers Lack of Knowledge / Analysis Reinsurers Treating the Symptoms Lump Sum Profitability First Mover Disadvantage Barrier Busting? KPMG/MRA/FSC Reinsurers Treating The Cause Acknowledge Risk Last Mover Disadvantage Rating Houses Risk Management 21

22 What Companies Must Do Review Experience Analysis Adopt FSC Table Bring up to date Review Assumptions Review Product - Increase prices - New product t&c s 22

23 What I Would Do If I Was an... AA / Experience Analysis Actuary Pricing Actuary Product Manager Claims Manager Or Underwriter 23

24 THANK YOU Brad Louis Wallace Lee Alex Threlfall Graham Kelly