When Insurance Premium Increases Signal It's Time for Professional Review

Insurance premium increases are an expected annual occurrence reflecting the actuarial reality that policyholders are one year closer to claiming with each birthday. Christopher Hall, AFSL 526688 authorised representative with over 20 years insurance industry experience, explains that understanding which increases represent normal age and claims-cost adjustments versus patterns potentially indicating insurer repricing, loyalty tax, or coverage misalignment helps Australian families make informed decisions. Professional review becomes valuable when premium increases coincide with changed life circumstances—paid-down mortgages, reduced family expenses, or maintained health—creating opportunities to adjust coverage whilst preserving essential protection.

Annual premium increase notices arriving in Australian letterboxes often prompt concern about affordability and value. Industry data shows individual disability income insurance premiums increased 15% over just two years to December 2022¹, whilst average risk product premiums rose 3% annually². However, determining whether specific increases warrant professional assessment requires understanding normal increase patterns, drivers of above-average increases, and personal circumstances indicating coverage reassessment would prove valuable.

This article explains expected premium increase patterns, identifies factors driving increases beyond normal age adjustments, and outlines circumstances where professional policy review helps families optimise coverage and costs.

What Premium Increases Should Australian Families Expect Annually?

Premium increases occur every year for life insurance policies structured with stepped premiums, reflecting the fundamental actuarial principle that claiming probability increases with age. Each birthday brings policyholders one year closer to the statistical likelihood of death or disability, requiring premium adjustments to maintain insurance pool sustainability.

Christopher Hall emphasises that premium increases represent a positive indicator—families celebrating another healthy year whilst maintaining protection for loved ones should expect annual adjustments. The alternative to seeing another year older is claiming on life insurance, making age-related premium increases a welcome trade-off for continued health and financial security.

Annual premium increases for stepped premium policies bundle three components: age-related risk escalation, inflationary adjustments covering medical and operational cost increases, and claims experience adjustments reflecting portfolio-level claims costs. These combined factors typically produce minimum annual increases of 12% for most policyholders, with 15% annual increases representing normal and expected patterns rather than concerning anomalies.

Premium increases exceeding 30% annually signal potential issues warranting investigation. Increases at this magnitude often indicate insurer pricing corrections for earlier underpricing, portfolio repricing following unexpected claims experience, or systematic adjustments reflecting industry-wide pressures. The current surge in mental health claims represents the primary driver of above-normal premium increases across the Australian insurance market. CALI research shows mental health claims increased 732% for 30-40 year olds over the past decade⁴, with insurers paying $2.2 billion in mental health claims during 2024⁵—almost double the amount paid five years earlier. These unexpected claims costs translate to premium increases exceeding standard age and inflation adjustments.

Industry data supports the elevated baseline for expected increases. KPMG analysis shows gross claims as a proportion of gross premiums increased from 61.7% to 64.6%—a 2.9 percentage point increase—in the year to June 2023³. With nearly two-thirds of premium income now funding claims payments, insurers require premium increases exceeding inflation merely to maintain existing service levels. Understanding this context helps families distinguish between expected increases reflecting actuarial reality versus concerning patterns potentially indicating loyalty tax or policy misalignment.

Why Do Some Insurance Premiums Increase More Than Others?

Premium increase variation amongst policyholders reflects differences in age, policy structure, insurer pricing strategies, and individual policy histories. Understanding these drivers helps families assess whether their premium increases align with reasonable expectations or warrant professional investigation.

Age progression represents the primary driver of premium variation. A 40-year-old policyholder experiences modest annual premium increases reflecting relatively stable mortality risk, whilst a 55-year-old faces steeper increases as claiming probability accelerates. Actuarial tables demonstrate mortality and morbidity risk increases non-linearly with age, producing premium increases that accelerate as policyholders approach retirement.

Policy structure significantly affects premium increase patterns. Stepped premium policies increase annually based on age, whilst level premium policies maintain consistent premiums over policy life through front-loading costs. Christopher Hall notes that whilst level premium structures appear attractive, they rarely prove cost-effective when maintained long-term, as most policyholders benefit from stepped structures allowing flexibility to adjust coverage as circumstances change. Families comparing their premium increases to others should first verify they're comparing equivalent premium structures, as level vs stepped comparisons prove meaningless.

Insurer-specific pricing strategies create premium variation across identical coverage. Some insurers price new business very competitively to attract customers whilst systematically increasing premiums for existing policyholders through loyalty tax application. Other insurers maintain more consistent pricing across new and existing customers but charge higher initial premiums Understanding Insurance Loyalty Tax. Neither approach is inherently superior—the optimal choice depends on individual health status, likely policy tenure, and coverage needs evolution over time.

Mental health claims surge affects all policyholders but impacts different age groups disproportionately. The 732% increase in mental health TPD claims for 30-40 year olds⁴ creates premium pressure concentrated in these demographics, whilst older policyholders face premium increases driven more by traditional mortality risk escalation. Portfolio-wide claims cost increases—with claims now consuming 64.6% of premiums³ compared to 61.7% previously—affect all policyholders through base premium adjustments regardless of individual claims history.

Individual policy history influences premium trajectories through underwriting classifications, claims experience, and policy vintage. Policies established before 2021 APRA insurance reforms may carry different premium structures than current products, whilst policies with claims history or non-standard underwriting terms follow distinct pricing patterns. Understanding whether premium increases reflect personal rating factors versus portfolio-wide adjustments requires professional analysis.

What Circumstances Indicate Professional Policy Review Would Prove Valuable?

Professional policy review becomes valuable when personal circumstances change in ways creating opportunities to optimise coverage, or when premium increase patterns suggest investigation of underlying drivers would inform strategic decisions.

Families who have paid off substantial mortgage portions since policy establishment may find their required death cover significantly exceeds actual needs. A family requiring $800,000 death cover when carrying a $600,000 mortgage five years ago may only need $400,000-500,000 after paying the mortgage to $200,000. Reducing coverage to align with current debt obligations provides immediate premium relief whilst maintaining adequate family protection.

Reduced family expenses similarly indicate coverage reassessment opportunity. Children who required 15 years of income replacement when establishing policies may now be financially independent or require fewer remaining years of support. Families can adjust coverage amounts, benefit periods, or policy structures to reflect current dependency patterns rather than circumstances from policy establishment years earlier.

Health status maintaining stable or improving since policy establishment creates strategic advantage for policy review. Families whose health remains unchanged or improves can more confidently compare existing coverage against market alternatives, as medical underwriting for new policies would likely produce standard rates without exclusions. Conversely, families experiencing health changes may find maintaining existing coverage—even with premium increases—provides better value than alternatives including exclusions or premium loadings for new conditions.

Christopher Hall's experience reviewing over 500 Australian policies reveals that assessment depends on answering three key questions: Has mortgage or debt reduced substantially? Have family expenses or dependency periods decreased? Is health status stable or better than policy establishment? When families answer "yes" to all three questions, review typically identifies straightforward coverage adjustments providing immediate premium savings whilst preserving appropriate protection. When answers prove mixed—some circumstances improved whilst others remained stable or worsened—professional conversation explores pros and cons of various adjustment options given individual priorities.

Premium increase patterns intersecting with changed circumstances create optimal review timing. A family experiencing 30% annual increases (suggesting insurer repricing or claims-cost adjustments) whilst simultaneously having paid substantial mortgage and reduced family expenses benefits from review determining whether premium increases fund necessary coverage or reflect misalignment between policy structure and current needs. Professional assessment separates age-related premium components from loyalty tax, repricing, or coverage excess When to Seek Professional Insurance Advice: The Review Process.

Financial pressure from cost-of-living increases creates decision points where families consider policy cancellation. KPMG data shows lapse rates increased 1.8% as financial pressure mounted⁷, with many families cancelling policies reactively without understanding alternatives. Professional review before cancellation identifies cost-reduction strategies—benefit period adjustments, waiting period increases, optional benefit removals—maintaining core protection at sustainable premiums rather than eliminating coverage entirely Should You Cancel Your Expensive Life Insurance? What to Consider First.

How Can Australian Families Assess If Professional Review Conversation Would Help?

Families experiencing significant life circumstance changes since policy establishment, or observing premium increases substantially exceeding 15% annually, may benefit from professional conversation assessing whether current coverage structure aligns with present needs and priorities.

Arrow Equities provides complimentary, no-obligation initial consultations to help families assess whether their circumstances indicate professional policy review would identify valuable optimisation opportunities. Speak directly with Christopher Hall's insurance specialist advisory team (AFSL 526688) to discuss premium increase patterns, life circumstance changes, and whether analysis of coverage structure versus current needs would prove beneficial.

Book Your Free Consultation

Initial consultations include:

• Discussion of premium increase magnitude relative to expected age and claims-cost adjustments

• Assessment of life circumstance changes since policy establishment (mortgage reduction, expense changes, health status)

• Preliminary evaluation of whether coverage amount and structure align with current family protection needs

• Explanation of comprehensive review process with no obligation to proceed

Phone, video call, and in-person consultations available across Australia.

Related Insurance Premium Review Resources

Understanding when premium increases indicate professional review would prove valuable connects to several insurance policy considerations. Families observing premium increases consistently exceeding 20-25% annually should evaluate whether insurance loyalty tax contributes significantly, as this systematic repricing affects long-term policyholders beyond normal age-related adjustments Understanding Insurance Loyalty Tax.

For those experiencing financial pressure from premium increases and considering policy modifications or cancellation, understanding options that reduce costs whilst maintaining essential protection helps avoid reactive decisions eliminating valuable coverage Should You Cancel Your Expensive Life Insurance? What to Consider First.

Professional assessment includes comprehensive analysis of premium increase drivers, evaluation of coverage structure versus current needs, and identification of adjustment strategies aligning protection with family circumstances and priorities When to Seek Professional Insurance Advice: The Review Process.

Frequently Asked Questions About Insurance Premium Increases

What premium increase should families expect annually for life insurance?

Families with stepped premium policies should expect minimum annual increases of 12%, with 15% representing normal and expected patterns. These increases bundle age-related risk escalation, inflation adjustments, and claims experience factors. Premium increases are an expected consequence of celebrating another healthy year whilst maintaining family protection.

Are 15% annual premium increases concerning for life insurance?

No. Christopher Hall's experience indicates 15% annual increases represent normal patterns for stepped premium life insurance policies, reflecting age progression, inflation, and claims cost adjustments. Increases exceeding 30% annually may indicate insurer repricing or unexpected claims experience warranting investigation of underlying drivers.

Why do insurance premiums increase every year?

Premiums increase annually because policyholders are one year closer to claiming with each birthday. Insurance pricing reflects actuarial probability of death or disability at different ages, requiring premium adjustments as claiming likelihood increases. Industry claims cost pressures—with 64.6% of premiums now funding claims payments³—additionally necessitate regular premium adjustments.

What causes insurance premiums to increase more than expected?

Premium increases exceeding 30% annually often reflect insurer portfolio repricing, pricing corrections for earlier underpricing, or claims experience adjustments. Mental health claims surge represents the primary current driver, with insurers paying $2.2 billion in mental health claims during 2024⁵—almost double amounts paid five years earlier. These portfolio-level pressures affect all policyholders regardless of individual claims history.

When should families review their life insurance coverage?

Families experiencing significant life circumstance changes—substantial mortgage reduction, decreased family expenses, maintained or improved health status—benefit from reviewing whether coverage structure aligns with current needs. Professional review helps determine if coverage adjustments would reduce premiums whilst preserving appropriate protection for changed circumstances.

Should families cancel life insurance if premiums increase significantly?

Cancellation requires careful consideration of alternatives. Families experiencing premium increases whilst simultaneously having reduced mortgage, decreased expenses, or maintained health may find coverage adjustments provide cost relief whilst preserving core protection. Professional review identifies modification options before reactive cancellation eliminates valuable coverage.

How do age-related premium increases differ from loyalty tax?

Age-related premium increases reflect actuarial probability adjustments based on claiming likelihood at different life stages. Loyalty tax represents systematic repricing where long-term policyholders pay more than new customers for equivalent coverage. Professional review separates these components, determining whether premium increases reflect appropriate risk pricing or systematic overcharging requiring strategic response.

Conclusion

Insurance premium increases of 12-15% annually represent expected patterns for stepped premium policies, reflecting actuarial reality that claiming probability increases with age. Families celebrating another healthy year whilst maintaining protection should expect regular premium adjustments as fundamental insurance economics rather than concerning anomalies.

Premium increases substantially exceeding 15-20% annually, particularly those approaching or exceeding 30%, may indicate insurer repricing, portfolio claims experience adjustments, or loyalty tax application. Mental health claims surge—with insurers paying $2.2 billion in such claims during 2024⁵ representing an 84.6% increase over five years—drives much of the current above-normal premium increase environment affecting Australian policyholders.

Professional policy review becomes valuable when premium increases coincide with changed life circumstances creating coverage optimisation opportunities. Families having paid substantial mortgage portions, experienced reduced family expenses, or maintained stable health since policy establishment often find straightforward coverage adjustments provide immediate premium relief whilst preserving appropriate family protection.

Christopher Hall's assessment framework centres on three key questions: Has mortgage or debt reduced substantially? Have family expenses decreased? Is health stable or better than policy establishment? When families answer affirmatively to these questions, review typically reveals adjustment opportunities. When answers prove mixed, professional conversation explores pros and cons of various modification strategies given individual priorities and circumstances.

Families experiencing concerning premium increase patterns or significant life circumstance changes benefit from initial consultation assessing whether comprehensive review would identify valuable optimisation opportunities aligned with current needs and financial priorities.

Sources & References

This article is based on data and insights from the following authoritative sources:

Industry Financial Data:

• KPMG Australia, "Life Insurance Industry Insights 2023," analysis of financial results to 30 June 2023

• APRA (Australian Prudential Regulation Authority), Life insurance statistics to 30 June 2023

Claims and Market Trends:

• Council of Australian Life Insurers (CALI), "Australia's Mental Health Check Up" report by KPMG (December 2024)

• CALI Media Release, "Mental ill health is straining Australia's safety net" (July 2025)

Professional Insights:

• Christopher Hall, Arrow Equities (AFSL 526688), based on review of 500+ Australian insurance policies

All statistics and data points referenced are current as of article publication date (January 2026) and represent the most recent publicly available industry information.

¹ KPMG Life Insurance Industry Insights 2023, customer impact data showing 15% increase in individual disability income insurance average premiums over two years to 31 December 2022

² KPMG Life Insurance Industry Insights 2023, market analysis showing 3.0% average annual increase in premium per policy for risk products to 31 December 2022

³ KPMG Life Insurance Industry Insights 2023, financial performance analysis showing gross claims increased from 61.7% to 64.6% of gross premiums for risk products in year to 30 June 2023

⁴ CALI "Australia's Mental Health Check Up" by KPMG (December 2024), showing 732% increase in TPD claims for mental health amongst 30-40 year olds over past decade

⁵ CALI Media Release "Mental ill health is straining Australia's safety net" (July 2025), reporting $2.2 billion paid in mental health claims during 2024, calculated as 84.6% increase from $1.3 billion five years earlier

⁶ KPMG Life Insurance Industry Insights 2023, showing industry recorded $1.2 billion profit in year to 30 June 2023

⁷ KPMG Life Insurance Industry Insights 2023, showing lapse rate increased 1.8% at 31 December 2022 compared to prior year

Educational Disclaimer: This content is for educational purposes only and does not constitute financial advice. Past performance is no guarantee of future results.

The information, opinions and other materials appearing on the Web Site are of a general nature only and shall not be construed as advice. Finer Market Points Pty Ltd, CAR 1304002, AFSL 526688, ABN 87 645 284 680. This general information is educational only and not financial advice, recommendation, forecast or solicitation. Rose Bay Equities accepts no responsibility for the accuracy or completeness of the information, opinions or other materials provided on or accessible through the Web Site. The Web Site has not been prepared with reference to your individual financial or personal circumstances. You should not rely on any advice in this Web Site without first seeking appropriate professional, financial and legal advice. Further, where Rose Bay Equities makes third party material available or accessible through the Web Site you acknowledge that Rose Bay Equities is a distributor and not a publisher of that content and that its editorial control is limited to the selection of those materials to make available. We accept no liability for any loss or damages arising from use.