TL;DR: The Quick Take
- By 31 December 2024, all Australian life insurers must update premium terminology in new policies, replacing “level” and “stepped” with “variable” and “variable age-stepped” (CALI, May 2024).
- Existing policies are not required to change; however, insurers may choose to update them over time.
- These changes stem from APRA and ASIC’s concerns over premium transparency and consumer expectations (APRA/ASIC, Dec 2022).
- Some advisers feel the new terms are clearer, while others (perhaps most) believe they risk confusing clients.
- Advisers need to update Statement of Advice (SoA) templates, adjust client conversations, and prepare for potential further reforms in 2026.
Why the Change?
For years, “level” and “stepped” premiums have shaped client expectations around life insurance pricing. However, regulatory reviews found these terms were not always accurate in describing how premiums change.
- “Level” premiums implied stability, yet insurers could still increase them due to factors like claims experience, reinsurance costs, and pricing adjustments.
- “Stepped” premiums highlighted age-based increases but overlooked potential non-age-related price changes, such as inflationary adjustments.
These inconsistencies led APRA and ASIC to raise concerns in December 2022, stating that insurers needed to improve disclosure and provide greater clarity on how premiums are structured (APRA/ASIC, Dec 2022).
As a result, CALI led an industry-wide initiative to standardise premium terminology, ensuring all new retail life insurance policies adopt the new labels by 31 December 2024 (CALI, May 2024).
New Terminology: What’s Changed?
The shift in premium labels aims to make it clearer how premiums behave over time:
| Previous Labels (For existing policies) | New Labels (For new policies from 2024) | Key Characteristics |
|---|---|---|
| Stepped | Variable Age-Stepped | Premiums increase annually based on age but may also change due to other factors like claims trends. |
| Level | Variable | Premiums do not change due to age but can increase due to insurer repricing, indexation, or economic conditions. |
CALI has published a consumer fact sheet explaining the changes and how they impact policyholders.
While these new terms aim to improve transparency, some advisers argue they may confuse clients, particularly those accustomed to the old terminology.
Key Dates & Industry Timelines
Understanding the implementation timeline is essential for advisers when discussing these changes with clients.
December 2022:
- APRA and ASIC issued a joint letter urging insurers to improve premium disclosure and transparency (APRA/ASIC, Dec 2022).
December 2023:
- APRA and ASIC reaffirmed their concerns over misleading premium disclosures and called for further industry action (APRA/ASIC, Dec 2023).
May 2024:
- Some insurers began rolling out the new premium terminology, aligning with CALI guidelines.
31 December 2024:
- Deadline for all life insurers to update premium terminology in new policies.
- Existing policies are not required to change but may be updated at an insurer’s discretion.
2025 and Beyond:
- APRA and ASIC continue to monitor the life insurance industry’s practices around premium increases, disclosure, and product design. They are prioritising initiatives that enhance transparency, ensure fair treatment of policyholders, and align premiums with consumer expectations. Future regulatory developments may include additional measures to strengthen consumer protections and improve clarity around premium adjustments
Impact on Policies: In-Force vs. New Policies
A major concern for advisers is whether these changes affect existing policies. The short answer:
- Existing Policies (Issued Before 31 Dec 2024)
- Retain “level” and “stepped” labels.
- Any premium adjustments will follow current contract terms and legacy PDS provisions.
- Advisers may not need to proactively notify clients unless a specific policy change occurs.
- New Policies (Issued After 31 Dec 2024)
- Must use “variable” and “variable age-stepped” terminology.
- Clients may hold policies under different frameworks, requiring clear explanation from advisers.
- Policy Renewals
- Existing policies will continue under current terms unless insurers opt to transition them to the new labels.
- Changing terminology for existing clients may create confusion, particularly if clients have multiple policies with different labels.
These changes increase complexity for advisers, as they must handle:
- SoA template updates to reflect new terminology.
- Conversations with existing clients—whether to retain the original terms or align them with new labels.
What Advisers Need to Do
1. Stay Informed
- Review ASIC’s RG 244 guidelines as they relate to premium disclosure and transparency (ASIC, 2024).
- Keep up with insurer communications about policy transitions.
2. Update Advice Documentation
- Ensure SoA templates and policy comparisons reflect the new premium categories.
3. Manage Client Conversations
- Be prepared to explain why a client’s old policy says “level” but a new quote shows “variable.”
- Some clients may feel concerned about the word “variable,” requiring reassurance that their policy isn’t inherently riskier.
4. Monitor Insurer Transitions
- Some insurers may choose to update existing policies, while others may not.
- Advisers should track how insurers handle legacy policies to avoid inconsistencies in advice.
Final Thoughts: Navigating the Transition
This change in premium terminology is not just a rebranding exercise—it is part of a broader push for transparency in the Australian life insurance industry.
- While CALI and regulators argue that the new labels improve clarity, many advisers feel the shift complicates conversations with existing clients.
- The good news: Existing policies don’t need to change, reducing immediate disruption.
- The challenge: Advisers will need to carefully navigate conversations, particularly when reviewing existing cover or recommending new policies.
By staying informed, adjusting SoA templates, and proactively preparing for insurer variations, advisers can ensure they remain trusted guides for clients navigating these changes.
Further Reading & Official Resources
- CALI Consumer Guide: Premium Labels Fact Sheet (May 2024)
- APRA & ASIC Joint Letters on Premium Increases: