According to the mid-year market update by Marsh Australia, group life insurance policies with long – term benefit periods witnessed an average premium increase of 15% – 25% in the first half of this year. This upward trend comes as the insurance industry grapples with a variety of factors.
For policies with adverse claims experience, the hikes were even more pronounced. In contrast, short – term rates and permanent disability premiums have remained relatively stable during this period.
Insurance providers have adopted a more cautious underwriting approach, especially when it comes to covering certain high – risk industries. Marsh pointed out a notable example: “A major life insurer exited the market for sectors such as law firms and insurance companies due to poor claims experience within these sectors.” This indicates that insurers are taking steps to manage their risk exposure more effectively.
In response to the rising premiums, some organizations are making adjustments to their employee benefit program designs. They are looking to reduce coverage, including that of group life insurance, as a cost – cutting measure to lower premium spending. However, this could potentially leave some individuals underinsured, which may pose risks to their financial security in the event of unforeseen circumstances.
Marsh also reported that the primary causes of claims have remained consistent compared to last year. Cancer continues to be the leading cause for life claims, while mental illness remains a leading factor for income protection claims. “Mental health claims have been a persistent and significant concern for insurers,” the report stated. The extended duration of mental illness claims, which take substantially longer to resolve compared to other claim types, has led to a significant increase in claims costs for life insurers.
The first half of 2025 saw a significant development in the corporate insurance space outside of superannuation with the return of a key player. This is a welcome addition, especially after the recent closure of another major life insurer, which had reduced the available options for clients. The increased capacity is expected to bring more competition and potentially more choices for businesses seeking group life insurance coverage.
Looking ahead, the market trends observed in the first half of the year are expected to continue for the remainder of 2025. The life market update, which is part of a broader insurance report, is available [here]. As the industry navigates these challenges, businesses and individuals alike will need to closely monitor the situation and make informed decisions regarding their insurance coverage.
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