Understanding changes to premiums in 2021

The life insurance industry, particularly Individual Disability Income Insurance (more commonly referred to as Income Protection), is facing sustainability and profitability challenges with risk products reporting a combined after-tax loss of $1.6 billion in the year ending 30 September 20201.

A message from Sue Houghton, Managing Director of Insurance at BT

What is happening?

BT’s Income Protection claim payments have almost doubled over the past 4 years. We have tried to limit the level of increases to premiums over the past few years.

However, like most insurers this year, we need to increase premiums for some products to ensure we can provide long term support to those that need it the most at the times that matter.

 BT Income Protection payments graph showing increase in claim payments from 2017 to 2020

If your premiums are increasing, a notification regarding the changes would have been sent, or will be sent to you 90 days prior to any premium changes taking place. If so, changes to premiums will take place from your next policy anniversary due for renewal on or after 1 April 2021. 

  • First notification: You’ll receive it 90 days before your policy anniversary and it shows the percent (%) increase that applies to your premium for your policy.

  • Renewal letter: Approximately 20 days prior to your policy renewal date, you will receive your renewal letter with the amount of your new premium. The letter will contain the details on your level of cover, the new amount of your premium and other relevant information. 

  • Policy anniversary date: If you have not actioned any changes to your cover before or on the anniversary date of your policy, the new premiums will take effect.
Illustration shows a notification letter will be sent 90 days prior and renewal letter will be sent 20 days prior to your policy anniversary date

Jordan has approximately 90 days before the new premium will be debited to make changes to his cover in order to reduce premiums, or keep his policy the same and pay the new premium.

If he doesn’t want to make any changes, there is nothing further he needs to do.

We understand that when premiums increase, it might become challenging to manage the increasing cost of staying covered and financially protected.

There are a few things you could consider below, but we recommend you speak to your financial adviser, or seek professional advice before you consider making any changes or cancelling your cover2.  

Your Protection Plans policy is flexible

Here are some options to change your cover in order to reduce your premiums for your consideration, which may or may not be suitable for you2.

You can choose one option or combine more than one to help reduce your premium even further. You can speak to your financial adviser, or contact us to secure quotes on one, or more of these options.

Reduce the monthly benefit amount

You may no longer need the benefit amount that you currently have.

For example, if you have paid down debt, and perhaps have less expenses to pay for since you took your policy out, then you may be able to reduce your benefit amount.

If you decide in the future to increase the benefit amount again, it will be subject to underwriting and eligibility then.

Change the waiting period before you can make a claim

Waiting Period is the length of time you will have to wait till you become eligible to receive the Income Protection monthly benefit when you make a claim.

Generally, the shorter the waiting period, the higher your premium will be. If you increase the waiting period and decide in the future you want to reduce it again, it will be subject to underwriting and eligibility.

Change the benefit period that you can claim for

The longer the benefit period, the higher the premium.

The benefit period is the maximum length of time your Income Protection benefit will be paid for, in the event of claim.  If you reduce the benefit period and decide in the future you want to increase it again, it will be subject to underwriting and eligibility.

Change cover from Income Protection Plus to Income Protection

Income Protection Plus offers more comprehensive cover by offering a number of extra benefits such as specified injury, crisis benefit, waiver of income protection premium or child care benefit, but these do come at an additional cost.

Please note that should you change your Income Protection Plus cover to Income Protection, and decide in the future you would like to change it back, underwriting and eligibility criteria may apply.

Remove the Accident Benefit 

The optional Accident Benefit pays a benefit if the Insured Person is totally disabled for a specified number of days during the waiting period due to an accidental injury. 

A future optional accident benefit take up will be subject to underwriting and eligibility.

Change cover from Agreed Value to Indemnity3

Your cover may be set for a specific amount. This amount would have been based on your income at the time the policy commenced and stays the same even if your income changes later.

This is called Agreed Value and is more expensive than Indemnity cover which uses your income at the time of claim to calculate your benefit. 

Making changes to your cover in order to reduce your premium will not require any medical questions to be completed with regards to your health.

If you decide to make changes in the future that will increase your cover and features, please note that they may be subject to an assessment and additional terms and conditions.

Case Studies

See how people have used some of these options and how much they have been able to save4. Here are their stories.

Download case studies (PDF 3.4 MB)

We have you covered

At BT we are proud to help our customers get back on their feet. In the financial year ending 30 September 2020, we paid close to $418m5 in claims, which included over $119 million in income protection payments to more than 2,303 claimants5.

$418m5

Paid in Life Insurance claims

$119m5

Income Protection claim payments

2,3035

Income Protection claimants

Why is this happening?

We are having to increase premiums to our Protection Plan policies given the rise in both the number of claims as well as the length of claims we are receiving. This combination and trend over the past few years is increasing costs for insurers. This challenge is not unique to BT and has had an impact across the whole life insurance industry.

Insurers now need to increase premiums to make sure these products remain sustainable, so they can provide long-term support for customers.

For level premium policies, there are also other factors we consider such as interest rates in Australia. To be able to help fund costs, insurers invest the premiums, and the returns help offset the premium increase that otherwise would have been collected as people age.

The low interest rate environment we have been in for some time, has significantly impacted insurers’ ability to help fund level premium policies and is further pressuring the life insurance industry.

Will there be other premiums increases?

Although it is hard to predict where the market will be in the future, especially in these challenging times, we will always inform you at least 90 days before the increase at renewal time (depending on the terms of your policy).

This will give us an opportunity to work with you should you need to contact us to discuss if you are having difficulty meeting your payments and discuss what options may be available.

How did BT calculate my premium increase?

We reviewed our premium rates based on a number of factors including the cost of providing your cover.

We vary our premium increases by product features and level of risk being insured, and this can reflect in the underlying cost to provide cover. Due to this, sometimes two different people will receive different premium increase amounts.

I can’t afford this policy anymore, what are my options?

Your Protection Plans policy is flexible, and here are some options that may help make your premiums more affordable. We recommend you speak to your financial adviser or seek professional advice before making changes to your policy.

I just received a letter from BT which only shows a percentage (%) of what my premium is going up by – what is the actual amount?

The new premium will only start at your next renewal. Approximately 20 days prior to the renewal date of your policy, you will receive your renewal letter displaying the premium for the next 12 months on the front page. 

Alternatively, please use this form to 'get information on premium increases' and ask for a 'new renewal quote'. We will prepare this calculation for you and send it to you by email.

If you’d prefer to discuss this over the phone, please call us on 1300 553 764.

I was told level premiums do not go up, why are they now increasing?

Level premiums do increase by CPI (Consumer Price Index) each year, so that the sum insured stays suitable for your needs for the years to come. You can turn the CPI increase off to reduce your premiums.

Level premiums are also subject to regular premium reviews and subsequent base premium rate increases. Currently, the industry is facing challenges with increasing costs1, compounded by the low interest rate environment. This has significantly impacted insurers’ ability to help fund level premium policies further pressuring the life insurance industry to review level premiums.

Will discounts on my policy still apply?

Yes, premium changes do not impact existing discounts and loyalty benefits.

I am currently on a waiver which I took out during COVID – what does this mean for me?

Your premium waiver will stay in place up until the agreed date. After this date, you will be subject to paying your premiums again.

If your policy renewed during the time your premiums were being waived, your new premium will be payable after the end of the waiver period. If your policy didn’t renew during this period, your premiums will continue to remain the same until your policy comes up for renewal.

We are here to help

8:30am-5:30pm Sydney time
Monday - Friday

Fill out the online form and we will get back to you.

If you are facing financial hardship, there may be ways we can help. Please contact us on 1300 551 431 to discuss what options may be available. 

Things you should know

A target market determination has been made for Protection Plans products. Please visit bt.com.au/tmd for any of our target market determinations.

The Insurer and Issuer is Westpac Life Insurance Services Limited ABN 31 003 149 157 AFSL 233728, except for Term Life as Superannuation, Income Protection as Superannuation and Income Protection Assured as Superannuation, issued by BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 as Trustee of Retirement Wrap ABN 39 827 542 991. They are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714, who does not guarantee the insurance. This information does not take into account your personal circumstances. Terms and conditions, and limitations and exclusions apply. Please read the Product Disclosure Statement to see if this insurance is right for you.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714

1. The Australian Prudential Regulation Authority (APRA) released its Quarterly Life Insurance Performance Statistics publication for the quarter. The life insurance industry’s performance continues to be challenged, with net loss after tax of $1.6 billion for the year to September 2020. https://www.apra.gov.au/news-and-publications/apra-releases-life-insurance-statistics-for-september-2020

2. It is important to understand that this is general information only and the options outlined do not take into account your personal objectives, financial circumstances or needs. We recommend you speak to your financial adviser, or seek professional advice before you consider making any changes or cancelling your cover. Making changes to a policy may impact such things as the benefit payable, the claim you can make or waiting period. Insurance cover may have different variables that will impact the changes to the premium. 

3. The Australian Prudential Regulation Authority (APRA) has mandated for all insurers to cease the sale of Agreed Value and Endorsed Agreed Value policies from 31 March 2020. If you do decide to reduce your premiums by switching the benefit type from Agreed Value to Indemnity, then you cannot change it back again if you or your adviser changes their mind later.

4. The premium reduction stories are illustrative only and do not represent actual events. The claims stories are based on real life claims but altered to protect the customer identities. The stories illustrate the potential risk of policy cancellation and the nature of the claims service provided, but not the type of claim that can be made on all policies.

5. Past payment statistics are not an indicator of future claim payments. Claims statistics are from the period between 1 October 2019 and 30 September 2020 inclusive paid by Westpac Life Insurance Services Limited ABN 31 003 149 157 (WLISL). Figures have been rounded to the nearest $1 million and are based on the total amount paid during the financial year, excluding claims paid for Westpac Group Plan insurance policies.

Westpac Life Insurance Services Limited (WLISL) paid out $104m in income protections claims between 1 October 2018 - 30 September 2019, and $119m between 1 October 2019 - 30 September 2020. Past claims payments are not an indication of future payments.