Income Protection Premiums Increase for 2021

Russell Cain Updated: 24 November 2021

Significant income protection price rises are sweeping across the industry. With the challenging economic times worsened by the Coronavirus, many insurers are forced to increase the price of their policies.

OnePath, ClearView, Asteron Life and CommInsure have recently announced level premium and income protection price increases for customers.

2022 Increases to MLC Insurance policies

Due to the continuing rise of claims, MLC has found that it’s necessary to make specific increases on several types of life insurance which they offer. Increases on your policy will depend on the commencement date of your policy and policy type. These premium increases will be applied on the anniversary date of your policy on or after 1 January 2022.

Policies that will be affected include policies that commenced on or after 17 October 2011, 23 November 2015 and 9 October 2017.

MLC premium rate changes

Death cover (Stepped and Level premiums): Changes ranging from -3.9% to +3.5%.TPD:  Changes between -2.3% to +3.0%.TPD – Additional Rate changes: Depending on when you applied for your policy and whether you pay stepped or level premiums, you can expect a rate change between 0% and 15%.Critical Illness: Increases ranging from -3.6% to +6.5%. Additional rate changes for critical illness and child critical illness range between 5% and 15%.2 / 5 year Benefit period Agreed value income protection (Stepped and Level premiums): Premium increases from 5% to 15%. 2 / 5 year Benefit period Indemnity value income protection (Stepped and Level premiums): Variations ranging from 10% to 15%.Agreed value income protection to age 65+ (Stepped and Level premiums): Premium changes range from 20% to 25%.Indemnity value income protection to age 65+ (Stepped and Level premiums): Increases between 20% to 25%.

2021 MLC Income Protection Premium Increases

If you are an MLC income protection policy holder, your premiums will increase when your policy renews on or after 1 October 2021. The specific increases on your policy will generally depend on the type of policy and the benefit period you’ve selected. These changes will be put into place from October on, but you’ll be informed of the precise details of the changes to your premiums when you receive your renewal letter.

If you have an income protection policy with MLC, you can expect the following price increases:

Cover typePremium increases –
MLC Protectionfirst and Navigator Wealth Protection – Income ProtectionPremium increases –
MLC Personal Protection Portfolio and MLC Life Cover Super2 / 5 year benefit period Agreed Value Stepped premiums10%5%2 / 5 year benefit period Agreed Value Level premiums10%7.5%2 / 5 year benefit period Indemnity Stepped premiums0%0%2 / 5 year benefit period Indemnity Level premiums0%2.5%Benefit period to age 55+ Agreed Value Stepped premiums25%15%Benefit period to age 55+ Agreed Value Level premiums25%22.5%Benefit period to age 55+ Indemnity Stepped premiums15%
(Product series 12 to 13 and Wealth Protection policies only increase by 10%)10%Benefit period to age 55+ Indemnity
Indemnity Level premiums15%
(Product series 12 to 13 and Wealth Protection policies only increase by 10%)17.5%

How Much Your Income Protection Premiums Will Go Up by in 2021

CommInsure

CommInsure, which was recently acquired by AIA, has implemented a 13.5% increase on income protection policies with stepped premiums from 30 May 2021 onwards. This is a result of a marked increase in the number of claims for serious illnesses like musculoskeletal conditions and cancer. If you have a CommInsure policy that is up for renewal, you’ll receive a notice of the increase at least 30 days before your premiums go up.

Premium increases for income protection policies are as follows:

Cover typeIncreases for the Income Protection rangeStepped premiums13.5%Level premiumsNo increases

MLC Convertible protection

Members of this fund who have an MLC Convertible Agreed Value income protection policy with a 2 / 5 year benefit period can expect a 5% increase. However, if you have an Agreed Value policy up to age 65, your policy will go up by 15%. To make up for the 10% step increase, which was introduced in 2020, increases for members at age 61 will be 5% lower than the increases outlined above.

BT Life Insurance

BT Insurance has announced the following premium increases for effective 4 January 2021.

New customers will experience a 15% rise in level premiums (lump sum and income policies) with no change in the stepped premium (lump sum and income protection policies with a 2 or 5 year benefit period), however there is a 20% increase for income protection policies to with a to age 55, 65 and 70 benefit periods. The optional Accident Benefit option premiums are increasing by 35%, independent to the above pricing changes.

Premium changes will be higher if they include any combination of the above, eg: a level premium to income protection policy with a to age 65 benefit period could expect an increase of up to 38%. For existing clients with BT Protection policies the premium increases is planned for April 2021.

When do the BT Income Protection Premium increases come into effect?

Premium increases on income protection policies are set to come into effect on policies with renewal dates on or after the 1st of April 2021. You’ll receive a notification, 90 days before your renewal date. Then you’ll receive a renewal letter, 20 days before your policy lapses which contains details about the new premium amount. Once your policy anniversary arrives and you haven’t cancelled your policy, your cover will be renewed and you’ll pay the new premiums.

Asteron Life

Existing Asteron Life customers experienced premium rises from 1 January 2020, including 16.7% for Income Protection and Business Expenses, 5.6% for Trauma cover, and a 7.6% premium rise for Total and Permanent Disability (TPD) insurance.

ClearView

Since 22 April 2020, new and existing Clearview income protection customers with benefit periods of 1,2- and 5-years experienced a 10% premium increase on stepped and hybrid premiums. Those with benefit periods up to age 60, 65, and 70 received a 35% price hike on stepped and hybrid income protection premiums.

OnePath

From 15 July 2020, new customers are paying 20% more for OnePath Income Secure Cover and Business Expense Cover. Additionally, level premiums have been removed from Income Secure Cover, Business Expense Cover and Living Expense Cover, and the built-in Unemployment Benefit is no longer available on Income Secure Cover.

Existing customer will experience a 25% rise in base premiums (stepped and level) for Income Secure Cover (excluding Essentials) and Business Expense Cover. As of 19 September 2020, there will also be a 12.5% increase on stepped and level TPD premiums (linked and stand-alone) for both new and existing customers.

Pricing changes will be communicated to existing customers from 22 September 2020, as part of your policy renewal.

What causes insurance premiums to increase?

A decline in insurance companies profitability resulted in The Australian Prudential Regulation Authority (APRA), making big changes to income protection insurance. One of the first significant changes was the end of Agreed Value income protection insurance for new customers as of 31 March 2020. From 1 July 2021, insurers might start to implement even more changes.

Other factors influencing the recent premium rise include:

High income protection claimsCovid19 severely impacting companies’ ability to invest premiums adequately  Economy under pressureLow-interest rate investment environmentIncreased lapse rate

How to reduce the price of your income protection insurance premiums

Protecting your
income is essential, so if you’re experiencing financial
difficulties, review our tips for reducing your premiums instead of
cancelling cover.

Increase your waiting period: Extending your waiting period can result in a significant premium reduction. For example, a policy with a 180-day waiting period will be much more affordable than one with a 30-day waiting period.Reduce your benefit period: You can potentially save a lot on premiums when reducing your benefit period, for example, to 5 years, instead of up until your age 65.Lower your benefit amount: Decrease the level of income provided if your premiums have become unaffordable.Choose an Indemnity policy: If you have an Agreed Value policy, you might want to consider opting for the cheaper Indemnity option. However, you won’t be able to take out a new Agreed Value in future as they are no longer available for sale. Also, with an Indemnity policy, you run a higher risk of receiving a reduced monthly benefit if your income is less at claim time compared to when you purchase the policy.Remove additional paid-for benefits: You might be paying extra for other benefits, for example, some companies charge extra to include the claims escalation benefit.Confirm your occupation: How your insurer rates your occupation has a significant impact on your premium price. For example, a tradesperson will generally pay a higher income protection premium compared to people working “safe” desk jobs.Shop around: Compare income protection policies from some of Australia’s largest brands and find a plan that provides value and works with your budget.Annual premiums: You can generally save 5% to 8% on your premiums when paying yearly.Level premiums: While you’re charged a higher premium at the start of your policy, increases happen more slowly than with stepped premiums because the cost of cover does not increase due to your age.Claim tax deductions: Income protection premiums are usually tax-deductible if held outside of your super fund and paid with your own money.

Frequently asked questions and answers

Can you cancel your income protection policy, and get a refund?

If you would like to cancel your policy, you’ll need to contact your insurer. Generally, if you have not claimed, you’ll be eligible for a full refund on all monthly premiums paid when cancelling within 30 days after your policy commences. If you paid premiums annually in advance, you’d usually receive a pro-rate refund.

Take note: No refund is payable when cancelling after the 30-day cooling-off period.

How are income protection premiums calculated?

Your premium is generally calculated each year on your policy anniversary. However, when applying for cover, various factors are taken into consideration when calculating the cost of your policy, including you:OccupationAge and genderSmoking statusHealth and family medical historyParticipation in hazardous sports/activitiesYour choice of benefit amountSelected waiting periodChosen benefit period

Will income protection premiums increase after a claim?

Generally no, your income protection premiums will not increase after receiving a claim payout.

Is there GST on income protection premiums?

No, there is no GST on income protection premiums for policies purchased through a life insurance company. However, it’s best to check with your insurer.