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Level premiums to remain

Despite the Australian Prudential Regulation Authority's (APRA) intervention to try and salvage individual disability income insurance, level premiums will continue to exist.

Speaking on a panel at the Association of Financial Advisers Conference, MLC chief of life insurance Sean McCormack said he doesn't believe APRA's changes will represent the "death knell" of level premiums as Australians still have insurance needs over the long term.

"The whole basis of level premium is about putting protection in place for the long term and I think what we'll see is more and more level premium contracts for fixed terms in nature and that will become more of the norm," McCormack said.

TAL chief executive Brett Clark said in some ways insurance businesses work better with level premiums but Australia in unique in its uptake and reliance.

"I would hope there's a future for level premiums, that's our intent. That's. But there are complications and it's more complex around level premiums," he said.

He went on to explain that low interest rates puts pricing pressure on level premiums and how it works within a five-year piece with income protection needs to be worked through.

"It's certainly not straightforward, it's more complicated. But it would be strange to me if it wasn't part of the future," he said.

AIA chief executive Damien Mu agreed and said the Australian market hasn't had a proper level premium or fixed term level premium product structure but the basis of the product is giving clients certainty.

"Let's fix a term where we can get certainty so therefore we are not over pricing products of a degree of uncertainty by factoring in that life might change in some circumstances, but there is certainty for a fixed term, when it's five, 10, 15 or 20 years that matches the client's needs," he said.

He explained the future of level premiums is thinking about how it works in the whole ecosystem and against best interest duty, price now versus price later and affordability.

Read more: APRASean McCormackAssociation of Financial AdvisersBrett ClarkDamien Mu
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