Axa Australia is planning to introduce blended premiums to its term life, total and permanent disablement, and trauma insurance offerings.
The new payment structure is being introduced in April 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.
Currently, individuals can only pay their risk coverage via stepped premiums or level premiums.
"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 a choice," Axa head of individual life Stephen Rosengen 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.
