We believe that an improved economic environment will only partly address the issues and waiting for an industry led solution may not leave players with much of a business to save. Sustained success will only come with a significant, pro-active program focusing on seven key ingredients. Together, these can deliver a 3% to 5% improvement in lapse rates within three years, realising hundreds of million dollars in value for insurers. Importantly, these ingredients can accelerate an insurer’s journey towards a customer-centric organisation by helping it effectively engage with its customers and adapt to their changing needs.
The Australian life insurance industry has recently experienced its highest lapse rates of the past 20 years. This in itself would be a cause for alarm, but the impact of high lapse rates has been compounded by a spike in claim rates, looming economic uncertainty and falling profitability. Insurers have had to be selective in their battles with an overreliance on improving economic conditions and industry initiated changes to address the retention issues.