Life insurance costs are falling sharply amid competition driven by the advisory market and falling mortality rates, a study by ClearView Wealth and Plan For Life shows.

Average premiums across the 11 major life insurers are down 10%, one has cut rates by 23% and the highest premium has fallen 16%, according to the report covering seven-and-a-half years to June 30 this year.

Price variation has also dropped; the gap between the cheapest and dearest options for equivalent cover was up to 30% in earlier years, but since last year it has fallen to 14%.

ClearView Head of Product and Underwriting Clive Levinthal says “competition caused by the independent financial advisers” has been driving down prices.

“Insurance pricing has multi-factor aspects,” he told insuranceNEWS.com.au. “There’s every possibility that improving mortality rates over time are contributing to it.”

However, “anecdotal evidence from the direct market is that we’re not seeing the same falls there”. This implies that, without competition from independent advisers, demographic factors “could be used to increase margins or offset losses from the income protection market”.

The advice segment of the life market is by far the largest, accounting for $7 billion in risk, while the direct market is worth only about $1 billion.

However, not all policyholders in the advisory market have benefitted from falling rates.

“There are different practices among insurers [regarding] whether price cuts are applied to historical customers,” Mr Levinthal said. “In many cases they’re not, or only back a few years.”

He says insurance brokers and advisers can negotiate cheaper rates when insurers do not apply rate cuts historically but only when the insured is seen as an acceptable underwriting risk, because policies are essentially renewed.

The study averaged premiums across four ages – 35, 40, 45 and 50 at the next birthday – and insured sums of $250,000, $500,000 and $1 million for male non-smokers.