AXA Insurance to introduce blended life insurance premiums

AXA Insurance Australia is planning to introduce a blended premium option to its term life insurance, total and permanent disablement insurance, and trauma insurance offerings.

The new blended premium option is being introduced in April 2010 and is designed to give individuals more choice as to how they pay for their risk cover, as well as to help customer retention rates.

This will make AXA Insurance the second life insurance company to offer this option following AIA Insurance's lead in this style of life insurance premium.

Currently, individuals can only pay their risk coverage via stepped premiums or level premiums.

The blended life insurance premium essentially means that policyholders pay a little more for life insurance than if they took out a standard stepped premium policy, depending on commencement age.

Blended premiums will rise as the policyholder advances in age, but reaches a capped level premium after 10 years. So they earlier clients take up a blended premium product the longer the period of level premiums.

AXA head of Individual Life Stephen Rosengren said that by adding another choice to the sales process, AXA hoped to boost customer retention levels in older age categories.

"If you want cheaper premiums to begin with you take out step premiums, but there is a higher risk the client is going to drop off when they get to 50 or 55 just because of the cost. That's probably the time, depending on the product, they actually should really have their insurance. So we thought what we can do with that is to provide greater choice," Rosengren said.

"On the other side you've got level premiums that are quite expensive early on, but at your older ages you are starting to see the benefits of that. But you've got to hold the policy for quite a while to get the real value add," he said.

The blended premiums will be priced in between the step and the level premiums at the outset of cover being taken and will rise over the first stage of the cover. After this period premiums will flatten out and become fixed for the remaining time frame of the insurance policy.

"We think this will be another choice in the sales process and it might help not only in terms of blended premium sales, but also level premium sales to help retain exiting policyholders. So it's a bit of a dual strategy," Rosengren said.

Source: AXA Insurance 2010

May 2010