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OnePath ratings good, but concerns remain over disability cover

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S&P Global has confirmed OnePath’s credit and financial ratings as A+ after the agency revised its criteria.

The insurer has a sound competitive position in the life sector and a strong financial profile, the ratings agency says, noting the 20-year distribution agreement between owner Zurich Financial Services and ANZ supports its assessment of OnePath’s strategic importance to Zurich.

Negative product-line experience in the individual disability income insurance (DII) market over the past two years has affected OnePath’s earnings, the ratings agency says.

The Australian Prudential Regulation Authority (APRA) has criticised the product design and pricing decision behind disability income insurance as harming the long-term interests of policyholders.

It is reviewing DII products across the board and says it will step up supervision of the sector if there isn’t enough progress on its problems.

APRA is worried that the product isn’t commercially sustainable in its current form. Life insurers have recorded losses in this line for four of the past five years. The worst loss was $598 million in 2014. Last year’s loss was $474 million.

A new white paper from General Reinsurance Life says the industry must take radical steps to fix the business line, including product design, pricing, deficient product ratings and employer shortcomings.