Life insurer TAL has posted flat annual profits, and warns economic uncertainty is causing Australians to cut costs and reduce cover.

Net profit after tax fell 1% to $91 million in the year to March 31, while underlying earnings, which remove non-cash items such as changes in discount rates, gained 14% to $123 million.

“TAL has performed favourably in this current market but we need to keep innovating and adapting to the needs of our customers and to streamline our business and operating costs to stay ahead,” CEO Jim Minto said.

The industry’s challenge is to stop consumers dropping or reducing cover, especially as claims are trending higher, he says.

TAL’s inforce premiums grew 13.4% to $1.58 billion and total claims paid and provided for increased 25% to $1.1 billion.

“The life insurance industry continues to suffer strong headwinds and TAL certainly saw higher claims levels flowing through, in disability lines especially,” Mr Minto said.