When Life Insurance premiums double within a year
Some people think premiums 'go up with inflation'. If only this was the reason! Most life insurance premiums in Australia go up in due to the increased likelihood our older age indicates (this is called Stepped premiums).
But even when premiums are not affected by age alone (as in the case of a Level-style premium) and whether or not one accepts the extra cover offered at renewal (called indexation), insurance premiums can go up at the discretion of our respective insurers.
And the trend is definitely up. For at least the last 5 years I have had insurer after insurer write to warn me that they were bumping up the rates on their policyholders beyond what had previously been forecast. These communications are usually couched in terms of the need to remain 'sustainable' and considering life insurers have been performing at historically low levels of profitability, I for one do believe this to be the case.
Inertia can be very costly when insurers increase premiums dramatically
That said, the increases are quite shocking even for me, an industry-insider who appreciates the broader context. Just today I read of one of Australia's biggest insurers announce that the average increase to certain Income Protection policies will be 50%. That is on top of any aged-based increase and/or renewal-based increase. In short, there is already a lot of premium pain and it is likely to get much, much worse.
So what can you do? Be pro-active, be discerning and be vocal. Don't take this trend as something to ignore. That's not to say it will always make sense to replace your policies or even reduce your cover. But whatever you do, obtain quality and trustworthy advice and move beyond the inertia that insurers rely on when they bump up premium rates across the board.