One of Australia's largest life insurers, TAL, has posted an 8 per cent fall in ordinary profit to $131 million, as its chief executive reports a surge in disability claims and industry-wide customer churning.
Jim Minto said he expected life insurance to be "even more difficult" this financial year, with the trend of increased claims and policy lapses difficult to fix in the short term.
"TAL is planning an improvement on 2012-13 but it will be a challenge to deliver that," he said.
Mr Minto said the patchy economy had prompted more disability and stress-related claims, and delays in people returning to work. Furthermore, while life insurance policies are designed to stay in force for some years, people were changing their policies more frequently as they cut costs and consolidated their super.
For the year to March, TAL's underlying profit - stripping out elements such as interest rate changes and one-off expenses - increased by 14 per cent to $123 million. Premium and other income increased 14 per cent to $1.86 billion and investment income soared 164 per cent to $281 million.
But provisions for policy reserves and others skyrocketed 83 per cent to $459 million and benefits and claims increased by 7 per cent to $1.178 billion.
The results are contained in the accounts of TAL's Japanese parent, Dai-Ichi Life, which bought TAL, formerly known as Tower Australia, two years ago for $1.2 billion.
TAL sells policies direct to customers, via financial planners, and through group and workplace superannuation schemes. A deal with industry fund AustralianSuper comprises about $300 million of its $1.6 billion in premiums.
Mr Minto said group prices were soaring by 25 to 50 per cent, a correction from prices that were too low.