Find out more about life insurance companies in Australia and receive quotes for cover.
This guide will provide an overview of life insurance companies in Australia and how to compare different quotes for various Australian Life Insurance companies to make an informed decision. The Australian Life Insurance market has undergone significant changes over the past twenty years that has lead to a very diverse range of financial institutions offering life insurance products. Top 10 life insurance companies.
Many of the traditional companies are now operating under some of Australia's major Banks. The arrival of superannuation caused a dramatic shift in the market as life insurance products became unbundled with a rise of competitive standalone products.
Top ten life insurance companies
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Which life insurance brands have the highest customer satisfaction?
According to a study by Roy Morgan on the 13 largest insurers in Australia, the top three insurers were Insuranceline, Allianz and AIA Australia.
Roy Morgan Single Source (Australia) December 7 2017
What's the difference between a brand and a company?
There's a difference between a life insurance brand and a company.
Companies. These are the ones who create the policy and assess the risk of the applicant,
Brands. This is who distributes and sell the policies to customers online or through advisers.
Note: A company can also be a brand, eg TAL also sells under it's own brand TAL.
After reviews for life insurers?
We list products from retail (advised) and direct brands.
Six steps to comparing life insurance companies
1. Policies on offer
With so many life insurance companies competing for your business, it is essential to choose the company with the best range of products to meet your needs now and into the future. Consider your own situation and compare what products and prices they have on offer.
2. Reputation and position in the market
Don't be fooled by rogue life insurance companies with names that may suggest financial strength. Ensure they are a recognised financial institution with a listed address. Research the company history, company profile and find customer reviews to compare.
3. Financial strength
When you consider the length of time that you will be dealing with your provider you choose, it is essential to find a company that is financially stable. One way to check this is by checking the companies financial strength rating. The last thing you want is for your company to face bankruptcy a few years into your insurance term.
4. Customer service
Finding the right life insurance policy is often a daunting task for many individuals. There is much to understand in terms of finding a policy to match your lifestyle, income and family situation. Make sure that you find a company with a team of professional insurance advisers on hand to answer all of your questions from day one. A dedicated financial adviser goes a long way in helping you get suitable cover.
5. Claims process
Ensure you find an insurer that takes the time to help walk you though the claims process. Read up on customer reviews and look out for any complaints from previous customers on the insurer's performance in providing coverage.
6. Cost of cover
Don't be fooled by the fine print when comparing premiums from different providers. Often a policy that may appear cheap at first will have hidden charges that will result in a much greater final payment. Compare policies based on your age, the policy structure and features and the amount of coverage you are buying.
How do life insurance companies assess risk?
The financial soundness of all life insurance companies is built around risk management. The companies must be able to protect themselves against the amount of risk carried by providing customers with life insurance cover. In its simplest form a Life Insurance policy structure consists of:
The insurer (the company itself): The seller of the cover.
Home insurance broker
The insured (or policyholder): The buyer of the insurance.
The insurance premium: The cost of Life Insurance cover, representing the risk involved to the company.
How do life insurance companies manage this risk
Life Insurance agreement: The ensuing insurance agreement involves the insurer guaranteeing an amount of compensation to be paid to the beneficiaries of the insured, should the policyholder die.
Periodical premium payments: In return, the policyholder will pay the insurer a sum of money (the premium) each month or annually throughout the agreed term.
Substantial portfolio: The insurance company secures their risk by having a large number of policyholders, most of whom under normal circumstances might not die within the prescribed time.
Applicants can benefit from doing their own research into different providers. As long as you are not purely influenced by chasing the lowest possible premium, you can find out a lot by examining a life insurance company’s structure, its size, reviews and longevity in the market, the risks it is exposed to and ease of access.
It is up to you to make your decision but make sure you don't put your decision off unnecessarily as you never know what circumstances could be bestowed upon you.
How is your premium payment determined?
Life insurance premiums are calculated using a variety of factors, each associated with a probability of the person passing away and hence a claim being made. A life insurer collects as much information related to these factors as possible, resulting in medical exams, personal questions and investigations into genetic diseases being conducted during the underwriting process. Here are some of these factors that determine the life insurance rates that you will pay, should you choose to take out life cover:
Age - As you get older, the health risks you face become significantly higher, hence resulting in a higher premium payment.
Gender - Women generally pay lower premiums than men due to women having a longer life expectancy than men.
Occupation - Insured people working in "High-risk’" occupations such as construction workers are required to pay a higher premium structure than people with "Standard" occupations such as office workers.
Lifestyle - Smoking habits, alcohol consumption and participation in high-risk hobbies are all considered to be risky behaviour that results in a higher premium structure than the people who do not participate in these activities.
Medical history and health - Certain medical conditions or diseases may increase the chance of a claim being made on the insured person, so people with existing or some exposure diseases or health conditions will be required to pay a higher premium.
How do life insurance companies make money?
The life insurance provider calculates what insurance premiums should be charged to account for the funds that could be claimed by customers as well as administrative costs of offering insurance products. The cost of providing insurance services is determined using mortality tables calculated by actuaries. Here are a few ways life insurance company minimise risks and become profitable:
High number of policyholders - In order to make premiums more affordable, life insurance companies require a large number policy owners. This allows them spread out the cost of providing a life insurance service.
Investment of premiums - Life insurance companies don't simply put the premiums you pay each month in the bank and wait to see if they have to pay out or not at some stage either. They invest the money they receive in high interest-bearing accounts, bonds and stocks. The vast amounts they have invested bring them huge returns, even when the stock market's not performing at its best.
Extensive application process - Life insurance companies make a profit if the premiums collected (revenue) outweigh the number of death claim payouts (expenses). To reduce their risk, they generally require people to complete their details and personal circumstances in an application. When necessary, they also include medical and blood tests, before issuing a policy. Insurance companies want as much relevant information from you as possible.
Detailed underwriting process - Life insurance companies undertake a comprehensive underwriting process to cut back their risks. This will ensure that each applicant pays an appropriate premium for the amount of cover they want over the period they want the cover for. As the applicants get older and the risk of dying increases while the coverage is still enforced, the cost of the same amount of cover grows proportionally.
History - Some Life Insurance companies have been around for hundreds of years. They have had tens of thousands of policyholders and they know what type of applicants who are more likely to claim death coverage, and what premium rates they need to charge policyholders to be profitable. They can also share information with a group of insurance companies for a more accurate measure of risk.
Key duties and responsibilities of life insurance companies in Australia
No matter what type of insurance plan or coverage you are have bought or are planning to buy from an insurance provider, the duties and responsibilities that the provider has to adhere to remain the same. This is because these duties do not relate to a specific type of product or service but to the insurance industry as a whole. There are a number of core duties and responsibilities that insurance firms have, which are as follows:
To not discriminate against potential and existing customers: Insurance companies do have the right to refuse coverage or even cancel existing coverage based on a range of factors. This could include anything from refusing coverage based on the risk that a potential customer poses to cancelling coverage due to false information or non-payment of premiums. However, what the insurance provider cannot do is to refuse cover or cancel existing coverage based on things such as the person's race, sexual orientation, marital status, religion or disabilities. Insurance firms also cannot make changes to the terms and benefits of an insurance policy based on these factors
Be fair and honest: When it comes to their business practices, insurance providers have to act with fairness and honesty, which means that using deceptive and unfair processes in order to stay a step ahead of the competition or to try and tempt new customers on board is out of the questions. Some of the practices that would be classed as unfair and which insurance firms can therefore not use include making false statements, misinterpreting insurance policies intentionally, impersonating clients, and taking part in bidding wars
Make payments on claims: The whole reason for consumers taking out insurance cover and paying premiums is so that they will receive a payout in the event of certain situations and circumstances that lead them to make a claim. Of course, the claim does need to be a valid and honest one and as long as it is, the insurance provider has a duty to pay out on the claim as per the terms of the policy and should do so in an efficient and timely manner
Legal handling of premium payments: For as long as the insurance firm is receiving premium payments from the customer, it must ensure that it handles these payments legally and continue to provide coverage to the consumer. Any excess premiums cannot be kept by the insurance firm and must be returned to the consumer within a reasonable amount of time
Efficient claims handling: Insurance providers need to ensure that all claims are handled efficiently and in line with their specified terms. Full payment should be made promptly in the event of a valid claim. In cases where the insurance firm is refusing to make a payout a full, honest and valid reason for the rejection of the claim must be provided. Providers cannot attempt to blackmail clients that make claims such as threatening to cancel their coverage if they refuse an offer of settlement. They are also not allowed to harass or hassle clients over any insurance claim that they are making
Who regulates the major life insurance companies Australia?
Companies that offers life insurance are financial services companies and are required to abide by the laws and regulations regarding the financial sector. These companies are regulated by the Australian Prudential Regulation Authority (APRA) to ensure that financial promises made by institutions are met within a stable, efficient and competitive financial system. APRA plays a critical role in protecting consumers and the financial well-being of the Australian community. The greatest concern of APRA is to ensure that life insurance companies are in a financially stable position to pay out possible claims made by customers, and that the insurance company will not go bankrupt.
Key precautions that APRA requires life insurance companies to adhere to:
APRA requires each Life Insurance Company to publish a Risk Management Strategy (RMS) that describes the approaches and processes for managing the risks that an insurer faces.
Risk identification and assessment - ensures that the life insurance company understands what risks it faces, and how they are controlling the risks faced.
Risk mitigation and control - not only do life insurance companies need to understand what risks they face, they need to make sure they have controls and mechanisms in place to deal with the risks.
Can an insurer cancel my policy?
As oppose to insurance products offered from general insurance providers, ie Personal Sickness and Accident Insurance, life insurance and income protection from Australian life insurance companies cannot be cancelled at any time. Many general insurance policies are cancelled after a claim has been made where life companies will continue to allow for future claims to be made for income cover plans. An insurance company can only cancel a life policy if:
The insured fails to enter into the contract in an honest and fair manner. This is regulated under the Insurance Contract Act of 1984 whereby both the insurer and the insured must be open and honest with each other about the risk that is to be insured.
Does not comply with the duty of disclosure.
Medical life insurance
Makes a misrepresentation during the initial policy negotiation before the contract was actually entered into.
Does not act within the policy provisions, including the payment of the actual premium.
It is the responsibility of the life insurance company to inform the policy owner 14 days prior to the policy renewal date that their policy is up for renewal. The insurer is to inform the policy owner if they are prepared to renew the policy and any new terms that may be applicable. Failure to do will mean that policy is automatically renewed under the same conditions already in place.
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