Matthew Collicoat & Carole Bailey
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Insurance Review - 6 March 2017
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Dear Matthew and Carole,
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’ life, disability, trauma and 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, and compared them against your existing insurance policies.
The charts beside summarise our findings. As you can see, your current policies are still quite price competitive, though just out of the top quartile of products by price. In saying that, we did find a number of products that were able to offer similar quality cover at a lower cost.
Matthew: Income Protection We found three products cheaper than your current cover, with the lowest cost being ClearView's Income Protection at $150.67 per month, closely followed by TAL at $151.71 per month. This equates to a cost saving of around 4.8%. 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 (slightly better funeral benefit etc.). We must also be careful in considering costs as many product issuers provide a discount for the first year of the policy, meaning that the costs after the first year may be the same, or more, than your current policy. Matthew: Life and Total & Permanent Disability insurance You are currently insured for $1.2 m life and $580,000 in the event of TPD, at a cost of $171 per month. We can get this cost down to about $164 per month. There are a number of good options available, including products underwritten by Zurich, TAL and CommInsure. Carole: Life and Total & Permanent Disability insurance In our review of insurance products we found two that offered cover at lower cost than your existing policy; one at around $96 per month, issued by MLC, and another at $106 per month, issued by Zurich. Although this offer by MLC is around 15% cheaper than your existing policy, we remain slightly skeptical that rates will remain this low. They have a poor track record for premium consistency. |
Our Recommendations
With the recent change in policy terms and pricing we find that a similar level of cover is available to you for slightly less than you are currently paying.
On the basis of cost alone it might be worthwhile considering a switch. However, there are four factors we need to carefully consider:
On the basis of cost alone it might be worthwhile considering a switch. However, there are four factors we need to carefully consider:
- There may be some loss of ancillary benefits (i.e., a reduction in funeral benefit associated with Matthew's Income Protection policy)
- 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 each), complete a medical questionnaire (plus time to sign and scan /post forms back to us), and you may be required to have a medical check-up (a nurse will visit you at home or office; this is at no cost to you). All up, I would expect you would each 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, CIPM®, MAppFin, GDFP
Insight Wealth Solutions
Third Sector Advantage Pty Ltd T/A Insight Wealth Solutions, Authorised Representatives of Synchron, AFS License 243313
Please Note: Rates are current at time of writing and are subject to change.