Are You Paying a 38% “Loyalty Tax” on Your Life Insurance?

Many Australians assume loyalty will be rewarded, but in life insurance, the opposite is often true.

Research suggests that long-term policyholders can pay 30–50% more than new customers for the same cover, with an average premium gap of around 38%. Over time, this can add up to thousands of dollars in unnecessary premiums.

Our Morrows, our Risk Insurance advisers, regularly see this pattern, particularly in policies more than five years old. Independent research also indicates that many Australians could achieve meaningful savings by reviewing or replacing their existing cover.

What the Numbers Tell Us

Recent analysis highlights growing concern around premium affordability:

  • Premiums were the most frequently mentioned issue in 35% of customer reviews over the past year
  • Policyholders satisfied with pricing had held their cover for an average of just 2.7 years
    Those dissatisfied had held policies for over 8 years on average

The trend is clear, the longer a policy is held, the more likely it is to feel expensive relative to the market.

Why Are Long-Term Customers Paying More?

Several factors contribute to rising premiums over time:
  1. Stepped Premiums: Premiums for life insurance often increase with age, particularly in trauma, total and permanent disability (TPD), and income protection (IP) policies.
  2. First-Year Discounts: Many insurers offer attractive discounts to new customers, but these discounts are short-lived. When they expire, premiums revert to higher standard rates.
  3. Legacy Insurance Brands: Older insurance brands, such as CommInsure, BT, and Asteron, are often closed to new business. Without competitive pressure, their premiums remain higher than those of newer insurers.
  4. Duration-Based Pricing: Many insurers structure their pricing based on how long you’ve held a policy, assuming that the risk of a claim increases over time. Discounts offered in the initial years of a policy gradually disappear, leaving loyal customers paying more.

Together, these factors can create a significant pricing gap between new and existing policyholders.


Why this happens

Regulators have also highlighted concerns around repeated and sometimes unexpected premium increases, reinforcing the importance of actively managing your cover — rather than setting and forgetting it.

While premiums increasing over time isn’t unusual, failing to review your policy may mean you’re paying more than necessary for the same (or outdated) cover.

When should you review your Insurance Policy?

If your policy is more than five years old, it may be worth revisiting.

Over recent years, pricing for new policies has become more competitive, particularly for those aged 45 and over. While switching insurers may involve underwriting and health assessments, for many clients, the potential savings and improved cover can make it worthwhile.

How Morrows Risk Insurance Can Help – What Can You Do?

A review doesn’t always mean changing insurers, but it does ensure your cover remains fit for purpose, cost-effective, and aligned to your current needs.

At Morrows, our Risk Insurance advisers take a strategic approach, helping you:

  • Understand how your current premiums compare to the market
  • Identify opportunities to improve cover or reduce cost
  • Navigate underwriting requirements if a change is appropriate

In a market where pricing can vary significantly, a proactive review can make a meaningful difference over time.

Reach out to arrange an obligation-free quotation. Let’s ensure your loyalty is rewarded, not penalised.

 

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