Premiums on group life insurance policies with long-term benefit periods increased 15%-25% on average in the first half, according to a Marsh Australian mid-year market update. 

Higher increases were seen for those with adverse claims experience, while short-term rates and permanent disability premiums were relatively stable.

Providers have adopted a more restrictive underwriting approach regarding coverage for certain high-risk industries.

“For example, a major life insurer exited the market for sectors such as law firms and insurance companies due to poor claims experience within these sectors,” Marsh says.

Some organisations are seeking to reduce cover in employee benefit program designs, including group life insurance, to reduce costs and lower premium spending, which could leave some individuals underinsured.

Marsh says primary claim causes remained consistent, and trends were stable compared with last year. Cancer continues to be the leading cause of life claims and mental illness a leading cause for income protection claims.

“Mental health claims have been an ongoing and significant concern for insurers, particularly due to the extended duration observed for such claims.

“Mental illness claims can take substantially longer to resolve compared to other claim types and have consequently contributed to a significant rise in claims costs for life insurers.”

The first half of the year saw the return of a key player in the corporate space outside of superannuation, and Marsh notes the additional capacity is welcome, particularly following the recent closure of another major life insurer, which reduced available options for clients.

Market trends observed in the first half are expected to persist through the rest of the year, the report says.

The life market update, part of a wider insurance report, is available here.