Canada Life warns of unsustainable rates

Decreases in insurance rates witnessed over the last few years are unsustainable, according to provider Canada Life.

According to Paul Avis, sales and marketing director of Canada Life, changes witnessed in group insurance rates have not corresponded with the pressures brought by a workforce made of increasingly older people.

An elderly workforce combined with a lack of new, young employees is putting a strain on provider coffers, Mr Avis warned.

He said: “The average age of a scheme member has increased by about one year since 2008. Group life rates would ordinarily increase by about 10 per cent for each one-year increase in age, but instead they have fallen by 19 per cent for life assurance and 37 per cent for income protection.

“This increased risk of a claim from an older population is not being reflected in the premiums being collected, leading to an unsustainable pricing position as insurers are squeezed in both ways.”

The increasing average age of policyholders is a result of changes in the law removing the default retirement age and confirmation that “ageist practices” are unacceptable as stated in the Equality Act 2010.

In contrast, the speed at which rates have dropped has been accentuated by more frequent rebroking as companies try to reduce costs.

According to Mr Avis, where advisers previously reviewed schemes at the expiry of their rate guarantees, more schemes have gone to market for mid-term reviews to take advantage of falling rates in the last few years.

The recession has also had a marked impact on the type of claims made, with the value of claims for suicide and alcohol-related deaths increasing by more than 25 per cent since 2009.

He said: “We have seen the impact of the higher ages we are covering, combined with the reduction in average rates, and we need to strengthen our prices to deal with the higher volume of claims we now expect.”