ClearView’s earnings in the year to June 30 took a hit from income protection (IP) and death claims, sending net profit in its Life Insurance business down 53% to $10.4 million.

Premium income rose 7% to $270.7 million, but the poor claims experience relative to assumptions wiped out $18.5 million. That was made up of $12.5 million in the Life Insurance segment and a $5.9 million allowance for an expected increase in COVID-19 related claims.

COVID-19 is likely to drive a further increase in IP claims from the secondary economic impacts of the pandemic, the company says.

ClearView MD Simon Swanson says the world “is grappling with unprecedented circumstances including significant economic, social and health challenges caused by COVID-19".

“We are taking action to ensure the sustainability of our Life Insurance business … so when conditions inevitably improve, ClearView emerges as a leader.”

The company says it acted swiftly to achieve more sustainable IP claims and there was a significant improvement in life insurance lapse performance in the second half on repricing and customer retention strategies.

Across all businesses, ClearView’s underlying net profit after tax fell 41% to $14.7 million in the year to June 30

“The result reflects broader industry trends and should be viewed in the context of overall industry performance, amidst extremely difficult market conditions,” ClearView says.

The Sydney-based life insurer says it is strongly positioned to capture opportunities arising from an institutional retreat from life insurance and personal advice as heavily restricted life insurance operations are “increasingly abandoned and advisers flock to boutique [licensees].”

Just before the pandemic struck, ClearView stopped selling agreed value IP and repriced its products and reviewed claim assumptions after new business premiums dropped by more than a third in the six months to December 31.

Price changes were made to ClearView’s flagship LifeSolutions product from April and it launched a new simplified Indemnity 60 IP option as a cost-effective alternative.

ClearView has accused competitors of engaging in ‘honeymoon’ discounting to maintain market share “rather than focusing on delivering long-term sustainable products and transparent pricing to customers”.

“Progress in the life insurance sector is being impeded by irrational competitor pricing and unsustainable product features,” ClearView said in a statement to the Australian Securities Exchange last week.

It also pointed to changes to adviser remuneration, higher education and training requirements and declining risk adviser numbers leading to shrinking life insurance sales

ClearView says 2021 will be a “base, transitional year” and that over time, as the industry shifts to rational pricing, profit margins and return on capital will improve.