Competition between life insurance companies based on short product cycles and preferred underwriting terms to attract market share is destructive to the industry, according to Asteron Life.
Uncertain market conditions caused Australians to scrutinise their discretionary spending last year. This led to lower consumer confidence and increased risk aversion, placing strain on the insurance industry, claims Asteron.
"These consumer and economic trends are impacting all players in the market. For manufacturers, we are experiencing increased policy lapses overlaid with low yields" Asteron executive general manager Jordan Hawke told InvestorDaily.
"These structural changes in the industry are deep and, I believe, permanent, and change the game considerably for product manufacturers."
The company said it is focusing on changing its business fundamentals through 2013 to ensure it has a sound long-term strategy.
"Customers are receiving renewal notices from their insurer and questioning whether there is a better deal, such as reductions on cover, alternative insurance providers, or cancelling some or all of their policies," Mr Hawke said.
"Life companies will, overall, need to make more sound long-term decisions for the health and sustainability of the industry into the future, rather than focusing on short-term plays."
