Mark Commerford
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Insurance Review - 6 March 2017
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Dear Mark,
A little while ago I sent you an email notifying you of planned premium increases by some of Australia’s largest life insurance companies.
With the rate increases (and some reductions) now having been announced and gradually being passed onto their existing customers we feel that now is an ideal time to compare how your policy’s features and pricing compare to the broader market.
A little while ago I sent you an email notifying you of planned premium increases by some of Australia’s largest life insurance companies.
With the rate increases (and some reductions) now having been announced and gradually being passed onto their existing customers we feel that now is an ideal time to compare how your policy’s features and pricing compare to the broader market.
Summary
As part of our review process we carefully reviewed all major life insurance companies’ Income Protection products and rated them based on claims history, policy definitions, financial stability, transparency and pricing stability. Any insurer who failed to meet these basic qualitative measures were filtered out and the remaining insurance products were then reviewed and ranked based on price.
The chart below summarises our findings. As you can see, your current policy is still quite price competitive, and well within the top quartile of products by price. In saying that, we did find three products that were able to offer similar quality cover at a lower cost.
The lowest cost product was Zurich FutureWise which is priced at approximately $3,785 per annum, roughly $140 (3.7%) per month cheaper than your current policy. Although there is no change in the level of Income Protection with this policy, your existing AIA policy does provide a slightly more comprehensive range of ancillary benefits, for example they provide a funeral benefit (death benefit) of about $45,500, whereas Zurich would only pay $22,800. It's also worth mentioning that costs will be further reduced should you wish not to have Claims Escalation benefits attached. Claims Escalation simply ratchets up the level of benefits you are paid, which can be helpful if you were on claim for an extended period of time (a period in excess of one year). If you removed this benefit the cost of cover with the Zurich FutureWise product reduces significantly, to $3,391 per annum. |
Our Recommendations
With the recent change in policy terms and pricing we find that a similar level of cover is available to you for up to $140 per annum less than you are currently paying, or $533 less were you to remove the Claims Escalation benefit.
On the basis of cost alone, we would suggest it’s worthwhile at least considering making a switch. However, there are four factors we need to carefully consider:
On the basis of cost alone, we would suggest it’s worthwhile at least considering making a switch. However, there are four factors we need to carefully consider:
- There will be some loss of ancillary benefits, most notably the reduction in funeral benefit.
- The rates are based on your continued good health and subject to satisfying the insurer’s risk guidelines (i.e., they need to be satisfied that your extra-curricula activities do not adversely affect your risk-rating)
- It will take time: Although we can manage the bulk of the paperwork it will also require some of your time to answer health and lifestyle questions (~30 min), complete a medical questionnaire (plus time to sign and scan /post forms back to us), and have a medical check-up (a nurse will visit you at home or office). All up, I would expect you would need to commit 1 to 1.5 hours from start-to-finish.
- Changing premiums: As you know the cost of insurance can fluctuate from year to year, mainly due to age-based risk factors, but also sometime due to changes in the competitive environment. A perfect example is AIA (your current insurer) who have gone from being the lowest-cost insurer (by a long way) to being priced close to the market average. We should be aware that the lowest cost insurer this year may be one of the more expensive insurers in 5 or 6 years time.
Next steps
If you would like to switch policies, or consider a change in the level of your cover, please let us know and we will advise you of the next step.
If you would like to retain your current policy there is nothing else you have to do. We will conduct another regular review as we approach your policy anniversary.
Of course if you have any questions whatsoever please contact me to discuss.
If you would like to retain your current policy there is nothing else you have to do. We will conduct another regular review as we approach your policy anniversary.
Of course if you have any questions whatsoever please contact me to discuss.
Joel Mitchell, CFA®
F.Fin, MAppFin, GDFP
Insight Wealth Solutions
Third Sector Advantage Pty Ltd T/A Insight Wealth Solutions, Authorised Representatives of Synchron, AFS License 243313