Income Insurance product solutions. Structuring with lump sum cover.

Income Insurance product solutions. Structuring with lump sum cover.

The new Income Insurance products launching industry wide, as a result of APRA’s sustainability measures, are going to reduce the income replacement ratio along with some of the additional benefits that have been added to these products over time. This creates a new challenge for Advisers as they consider how they utilise a range of product solutions for clients to provide the benefits and protection they need, at a price point that is affordable.

To support these conversations, we have pulled together some considerations for the role lump sum covers may play when the new Income Insurance products go live on 1 October 2021.

The role lump sum covers (TPD & CI) may play post 1 October 2021.

With the changes to the design of Income Insurance products, there could be an increased need and consideration of complementary lump sum covers such as TPD & CI.

Changes to income replacement ratios for Income Insurance and growing pricing pressure on longer term benefit periods will mean that advisers need to deeply consider the combination of covers that best meet a client’s needs, objectives and overall budget.

Matching shorter term Income Insurance benefit periods such as 2 & 5 years with complementary lump sum covers is expected to be part of the considerations that advisers will make as a result of the changing industry landscape.

Lump sum covers, such as Total and Permanent Disablement (TPD) and / or Critical Illness (CI), provide long term protection and cover for significant costs like mortgage repayments or extra-ordinary medical expenses.

Other unexpected expenses could include things like accommodation, grief support, child support, overseas assistance, bed confinement, family support, or home care. All these and more are included in our Care Support Package which is provided at no extra cost on all lump sum covers as part of Integrity’s Here For You product.

The total income replaced will not be 100%. If your client becomes permanently disabled or critically ill, income insurance may not be enough.

And yet many Australians use 100% of their income each month. So how do you cover all the expenses of managing a sickness, accident or illness that potentially impacts a client’s financial situation?

Critical Illness Cover offers a lump sum payment to manage medical expenses if your client is diagnosed with a specified medical condition which may have an impact on their ability to meet their financial commitments. Together, Income Insurance Cover combined with Critical Illness Cover can provide support to clients financially to cover both household costs, as well as medical expenses.

Higher levels of TPD cover may need to be considered, to help financially support clients if they suffer a significant life-changing illness, accident or injury. Put another way, if your client is unlikely to ever work again, TPD is an option to ensure significant and ongoing medical costs are taken care of as well as any home modification adjustments needed to adapt to their ‘new normal’.

 

Please note: This information has been prepared without considering your personal objectives, financial situation or needs. Before acting on it, please consider its appropriateness to your circumstances.

Integrity Life

Integrity Life

From the newsroom

Integrity’s new pricing, what does it mean for you and your clients?

Integrity’s new pricing, what does it mean for you and your clients?

What are the changes?

Integrity Life takes an industry stand, by removing unnecessary and archaic fees to make it more affordable for everyday Australians to get protected. We have also sharpened our pricing in the following areas:

  • Packages of Lump Sum covers with and without Income Insurance
  • Clients aged 30-50
  • White and light blue occupations primarily
  • 2- and 5-year Income Insurance Benefit Periods

Not every possible client scenario will result in a decrease in premium especially standalone Age 65 Income Insurance. However, our combination of premium reshaping, removal of monthly premium loadings along with our approach to not charging policy fees, 2-year base premium rate guarantee, and laser like focus on efficiency, we believe we’re making the cost to serve clients more attractive for Advisers, which will allow more people to benefit from the value of Financial Advice and the protection of life insurance.

What about monthly premium loadings?

Integrity has also removed unnecessary, additional fees to pay monthly insurance premiums for all new business, another outdated legacy which hasn’t kept pace with changing consumer expectations and experiences. Our GM of Sales, Marketing, CX and Product outlines why Integrity has taken a stand on this important issue. “We believe that clients should be able to pay by the month at no extra cost. The long-standing industry practice of charging additional loadings when premiums are paid monthly just doesn’t stack up anymore. It imposes an unnecessary cost on policyholders at a time when affordability is such a critically important consideration for most everyday Australians. We believe it’s time that we move on from such archaic industry practices and open our industry up to more customers who need the peace of mind of being adequately protected.”

Why has Integrity made these changes?

Our MD and CEO, Sean McCormack said it best “This represents a significant shift in our focus as an insurer towards providing protection for more everyday Australians. As a digital first insurer we have both the capability and modern customer experience that is aligned with what these everyday Australians expect and need in our changing and evolving world. Life insurance can’t remain analog in the digital age, and this is a further step to help provide protection for more Australians. This combined with our laser like focus on operational efficiency for our partners, means we have a compelling proposition to take to mainstream Australia and deliver meaningful benefits to them by being insured with a modern, contemporary insurer.”

I have more questions, what should I do?

Please reach out to your Integrity Life BDM, but if you’re new to Integrity then please contact us here and we would be happy to assist you.

Please note.

This information has been prepared without considering your personal objectives, financial situation or needs. Before acting on it, please consider its appropriateness to your circumstances.

Integrity Life

Integrity Life

From the newsroom

How to make working from home, work for you.

How to make working from home, work for you.

Whether or not you’re working from home as a result of restrictions, we know that the ever-evolving COVID situation means that being flexible is key. Here are some neat ways that Advisers can continue to service their clients in a COVID safe way.

Record your client meetings with Zoom.

By now, most working Australians will have better video conferencing skills and be more comfortable conducting meetings this way. By recording your calls (with permission of course) you have a record for compliance purposes, it can also be a value add to clients to give them a copy so they’re not having to take notes and can refer to your awesome advice at any time!

Signature free (almost).

No signatures are required from you or your client when submitting applications. All client authority and declarations are done online, with one exception. For legal reasons we require a client signature for Binding Beneficiary Nominations insurance taken out within Integrity’s ‘Here for You’ Super Plan. Completed forms can be accepted via email to hello@integritylife.com.auOur revised terms are also offered online and are available for you to accept in our portal electronically, without the need to provide your client’s signature.

Send app to client.

Completing face-to-face applications can be challenging in the time of COVID, but we have a solution that not only gets around this, but it also saves you a heap of time with data entry. We built a feature in our portal that allows you to send part of the Insurance Application directly to your client for them to complete some of their personal information.

You stay fully in control though and are alerted when the information has been completed. We don’t do anything with this info until you have checked it and submitted the application.  

While we know this isn’t a solution for everyone, it can work for some clients. Around 50% of our Advisers use this feature in 40% of cases, the best number though is that we have a 100% completion rate. This is (in part) because we do all the follow-up to ensure the forms are complete, and because extensive user-testing means the forms are simple and easy for clients to complete.

Why not give some of these ideas a try?

Integrity Life

Integrity Life

From the newsroom

DDO changes coming 5th of October, 2021. Are you ready?

DDO changes coming 5th of October, 2021. Are you ready?

What is DDO? And why was it created?

DDO stands for Design and Distribution Obligations. From 5 October 2021, DDO has been introduced to Chapter 7 of the Corporations Act. The new obligations are intended to help consumers obtain appropriate financial products by requiring issuers and distributors to have a consumer-centric approach to the design and distribution of products.

Issuers of financial products (that’s us!) are required to ensure products are designed to meet the needs of consumers for whom the product is designed/intended for and distributors (that’s you!) will need to ensure they’re being recommended to consumers who are in the target market which has been defined / set out by the issuer.

 

What will change as a result of DDO? Introducing the Target Market Determination.

From 5 October 2021, all products we issue which are designed for retail clients will need to have a Target Market Determination prior to the product being distributed. The TMD outlines the key features of the product, the intended consumer for the product, how the product might meet the needs and objectives of a consumer in the target market, and an outline of how and when we will review the TMD.

There is also a requirement for all product issuers to collect data from distributors in order to monitor product distribution is being undertaken inline with the TMD.

 

What information does Integrity need to collect? New adviser responsibilities.

Good news, we already collect most of the information needed to regularly assess whether changes are required to the design of our products so we can better meet the needs of the target market. Our Distributors will need to provide us with information about:

• Any product related complaints; and

• Any other information we specify in the Target Market Determination. 

Distributors are also required to notify us of any significant dealings which are inconsistent with the Target Market Determination, within 10 business days. Integrity will be providing a final copy of TMDs to our Distributors by 1 September 2021

What about a product sold under general advice?

As part of the application process, Advisers will be asked to identify whether the product is being sold under personal or general advice. This information will assist us gain insight into consumer outcomes and whether the TMD remains appropriate on an ongoing basis.

For Distributors, their DDO obligations vary depending on whether they provide general or personal advice to their clients. We recommend you speak to your compliance team about your responsibilities here.

    Integrity Life

    Integrity Life

    From the newsroom

    Hidden elements of income insurance that undermine sustainability.

    Hidden elements of income insurance that undermine sustainability.

    APRA’s edict to life insurers to focus on sustainable practices in respect to the design, features, pricing and management of individual disability income insurance, places responsibility on product managers and actuaries to rebuild the product.

    Not only do the products have to be sustainable, but they also need to be attractive to consumer and, of course, do the job. It must protect the insured’s income by providing a benefit in the event of illness or injury.

    To achieve this, APRA have stepped in and told insurers to remove elements and add restrictions on others in order to ensure the future of the products. Outside excessive discounting for new clients paid for by existing ones, there are some other less obvious discounting practices – that may erode profitability over time.

    My examples both relate to the underwriting process; a process of negotiation sometimes- but it seems often the wrong aspects are being bargained.

     

    Manipulation of occupational rating factors.

    One of the easiest ways to obtain a discount for disability income is to try and move a client’s occupation rating to a higher category (eg white collar to professional) the idea being that more ‘select’ occupations get higher discounts. 

    But – select occupations tend to be less common and it is tempting for advisers to negotiate with underwriters on the basis that their client deserves to be in a more “favourable” category – and hence get a discount, even if the client doesn’t strictly meet the criteria to be included in that category.

    The problem is that the life insurers’ book is then skewed toward discounted lives when the expectation is that the book will be balanced – yes, some occupations will be discounted, but most pay a standard rate and some a loaded rate – to account for the differences in claims experience across different occupations.

    So, if a life insurers’ premiums are expected to be balanced – but too many are discounted by creep into a discounted occupational category – the effect is that profit is reduced as there is not enough premium to cover expected claims, expenses and commission collected.

     

    Loading Waivers.

    This works by providing selected advisers the ability to ‘waive’ medical loadings up to a limit – that is, a loading is imposed by the underwriter after the medical assessment and recorded on the policy system – but not charged to or paid by the client. 

    The effect is that all the insured lives who are not clients of an adviser in the loading waiver program subsidise all those clients whose loadings are waived. This is not equitable, or in line with the principles of risk sharing and insurance generally.

    This practice also erodes profitability by attracting a higher number of substandard lives – as an adviser will always place business where most favourable (and cost effective) for clients. So, if one company offers loading waivers and one does not – then the loaded lives will all be placed as ‘standard’ with the company offering waivers.

     

    The final thought.

    The challenges facing our industry have not been cause by one single event, but rather a series of choices that erode over time. Part of our commitment to the industry, clients and Advisers is to acknowledge these practices and present a better way forward.

    Scott Hodgson

    Scott Hodgson

    Chief Underwriter