Features That Define Life Insurance Premium Rates In Australia
Copyright (c) 2014 Kerrie Peacock
Life insurance premium rates and prices for the Australian markets are calculated and determined by actuaries. These professionals use statistics in mortality and interest rates to come up with price caps. Although these are the main factors used to determine insurance rates, additional ones may be used alongside these. These include:
Number Of Insurance claims
An increase in insurance claims by beneficiaries and the market in general leads to a rise in life insurance premium rates. A reported released by the Australian Prudential Regulation Authority showed a 12% increase industry insurance premiums in one year. The same report also revealed that this was prompted by the sudden increase in insurance claims from these companies that had been victims of the same incidences. As long as more and more people are filling claims from the same event or calamity over a small period, then chances are premiums covering the same are re-evaluated and their prices revised.
The reason why these policies are revisited and their prices reviews is because they are considered high risk factor. The move to increase the premium rates on such insurance cover is to help safeguard the insurance company's finances. It is also a way of safeguarding the company against bankruptcy from paying insured companies and persons.
Cancelled Insurance Cover Due To Missed Payments
If an insurance company records high lapses due to clients failing to pay for an insurance cover, it may be forced to review the specific cover premiums. These lapses may be as a result of unaffordable premium rates, or just because people do not see a reasons to have such cover. This is mainly considered when determining life insurance premiums based on low risk factors. The higher the lapse rate an insurance policy has, the company may be forced to lower its premium rates to attract more customers. On the contrary, if very low lapse rates are recorded over a financial year, chances are the policy is in demand and insurance companies are most likely to increase its premium rates for that period.
If you are to buy insurance cover and don't want to suffer lapses, it would then be advisable if you purchased a policy with affordable premium rates. Purchasing what you can afford and maintain reduces any lapse probability hence leaving you with an insurance cover for longer. The Australian Prudential Regulation Authority has however proposed to actuaries regarding placing a capped price on certain premiums to safeguard policy holders.
Health And Age Factor
Age is a common and influencing factor used by actuaries to determine a policy's premium rate. Policies covering a certain age group are most likely to be much higher. This is to say that, policies covering persons under the age of 30 have lower premium rates than those over the age of 50. This is because the mortality rate of youth is much lower than that of a retired person. According to the Australian Bureau of Statistics, 37% of the Australian population is made of aged persons. These people have to pay higher interest rates than the younger generation. A person with a terminal illness or a medical condition is also forced to pay high on premium rates simply because he/she is considered to have a short life expectancy. This is according to a report released by the Australian Institute of Health and Welfare in 2008.
Life insurance premium rates and prices for the Australian markets are calculated and determined by actuaries. These professionals use statistics in mortality and interest rates to come up with price caps. Although these are the main factors used to determine insurance rates, additional ones may be used alongside these. These include:
Number Of Insurance claims
An increase in insurance claims by beneficiaries and the market in general leads to a rise in life insurance premium rates. A reported released by the Australian Prudential Regulation Authority showed a 12% increase industry insurance premiums in one year. The same report also revealed that this was prompted by the sudden increase in insurance claims from these companies that had been victims of the same incidences. As long as more and more people are filling claims from the same event or calamity over a small period, then chances are premiums covering the same are re-evaluated and their prices revised.
The reason why these policies are revisited and their prices reviews is because they are considered high risk factor. The move to increase the premium rates on such insurance cover is to help safeguard the insurance company's finances. It is also a way of safeguarding the company against bankruptcy from paying insured companies and persons.
Cancelled Insurance Cover Due To Missed Payments
If an insurance company records high lapses due to clients failing to pay for an insurance cover, it may be forced to review the specific cover premiums. These lapses may be as a result of unaffordable premium rates, or just because people do not see a reasons to have such cover. This is mainly considered when determining life insurance premiums based on low risk factors. The higher the lapse rate an insurance policy has, the company may be forced to lower its premium rates to attract more customers. On the contrary, if very low lapse rates are recorded over a financial year, chances are the policy is in demand and insurance companies are most likely to increase its premium rates for that period.
If you are to buy insurance cover and don't want to suffer lapses, it would then be advisable if you purchased a policy with affordable premium rates. Purchasing what you can afford and maintain reduces any lapse probability hence leaving you with an insurance cover for longer. The Australian Prudential Regulation Authority has however proposed to actuaries regarding placing a capped price on certain premiums to safeguard policy holders.
Health And Age Factor
Age is a common and influencing factor used by actuaries to determine a policy's premium rate. Policies covering a certain age group are most likely to be much higher. This is to say that, policies covering persons under the age of 30 have lower premium rates than those over the age of 50. This is because the mortality rate of youth is much lower than that of a retired person. According to the Australian Bureau of Statistics, 37% of the Australian population is made of aged persons. These people have to pay higher interest rates than the younger generation. A person with a terminal illness or a medical condition is also forced to pay high on premium rates simply because he/she is considered to have a short life expectancy. This is according to a report released by the Australian Institute of Health and Welfare in 2008.
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