TAL Group CEO Brett Clark has urged life insurers to be less reliant on premium increases to grow, while regulator Suzanne Smith warns the industry faces many challenges that require an “adapt and innovate” mindset.

Mr Clark says life insurers have seen a generational and permanent structural shift in recent years, characterised by regulatory reforms before and after the Hayne royal commission in 2018.

“The industry today is almost unrecognisable from where it was five years ago and while it has been a challenging set of circumstances for many of us to navigate, there is no doubt in my mind that there are benefits for customers and also for the industry coming out of this period,” he said.

“However, I think there is also reason to pause … in terms of customer access and customer reach to life insurance products and services … we’ve seen a fall in sales of life insurance.

“So through these times of rapidly decreasing customer numbers, the industry has largely managed to tread water on premium volumes, a direct result of pricing increases to new and existing customers. However, that’s no way to grow or in this case barely maintain a business or an industry and, more importantly, build deeper engagement and trust with customers and community.”

He says the industry could “reorient how we think about growth and success by focusing more on customers ... simply focusing more on customer numbers rather than dollars”.

Australian Prudential Regulation Authority Executive Board Member Ms Smith, who spoke at an actuaries summit last week alongside Mr Clark, says the challenges are complex.

New retail business sales have dropped more than 50% in the past five years. And the number of financial advisers has declined 43% over the same period, leaving many consumers struggling to grasp the value and scope of their coverage.

Other issues relate to the industry’s pricing practices, legacy product design and an erosion in consumer trust caused by poor claims experience, outdated products and fluctuating premiums.

“For the life insurance industry to go beyond its foundational level and to thrive … the industry must be able to adapt and innovate to meet evolving consumer needs, allowing more Australians to understand and access valuable insurance,” Ms Smith said. “While these challenges are significant, they do present opportunities to rebuild relevance and trust within the community.”

She says innovative products are important because of changing demographics and risk profiles. For example, growing levels of mental illness require coverage solutions.

“Many will have pre-existing conditions when they seek out insurance, and in our current model they face higher premiums and either partial – or in the worst-case scenario – total exclusion from cover.

“Although there are no quick fixes and experimentation is required, we encourage the industry to focus on community understanding, community coverage and community outcomes, which in turn will foster industry sustainability.”