TAL Insurance posts 8 Per Cent Lower Profit One of Australia's largest life insurers, TAL, has posted an 8 per cent fall in ordinary profit to $131 million, as its chief executive reports a surge in disability claims and industry-wide customer churning. TAL Group CEO Jim Minto said he expected life insurance to be "even more difficult" next financial year, with the trend of increased claims and policy lapses difficult to fix in the short term. "TAL is planning an improvement on 2012-13 but it will be a challenge to deliver that," Mr Minto said. He said the patchy economy had prompted more disability and stress-related claims, and delays in people returning to work. Furthermore, people were changing their policies more frequently as they cut costs and consolidated their super. For the year to March 2013, TAL's underlying profit - stripping out elements such as interest rate changes and one-off expenses - increased by 14 per cent to $123 million. Premium and other income increased 14 per cent to $1.86 billion and investment income soared 164 per cent to $281 million. But provisions for policy reserves and other items skyrocketed 83 per cent to $459 million and benefits and claims increased by 7 per cent to $1.178 billion. The results are contained in the accounts of TAL's Japanese parent, Dai-Ichi. Dai-Ichi Life bought TAL, formerly known as Tower Australia, two years ago for $1.2 billion. TAL sells policies directly to customers or via financial planners, and through group and workplace superannuation schemes. One of its highest-profile Australian deals is with industry fund giant AustralianSuper, which comprises about $300 million of its $1.6 billion in premiums. TAL's Mr Minto said group prices were soaring by between 25 and 50 per cent, a correction from prices that were too low. "We're going back to the true price of cover," he said. And he said that as a specialist life insurer, TAL was attuned to industry trends and had therefore weathered challenging industry conditions better than its rivals. Wealth manager giant AMP recently said the insurance industry was "suffering from poor lapse and claims experience across the board, with industry lapse rates at a 10-year high." Its managing director, Craig Dunn, said that in challenging economic times, "more people are deciding to reduce their insurance cover or to cancel their policies altogether. The cost of some insurance claims also tends to increase in tougher economic environments, as it takes longer to get people back to work. In a note looking at the big banks' wealth management and life insurance results, UBS analyst James Coghill said "higher lapses are now being acknowledged as structural as well as cyclical" and life insurance was now delivering returns below the cost of capital for most insurers. Mr Coghill said profit margins at AMP, Commonwealth Bank and NAB had declined to mid-single digits, compared with up to 10 per cent one year ago. Dai-Ichi said TAL had "maintained its favourable sales trend, especially in the individual risk area, outperforming its original forecast. But briefly speaking, TAL's net income in Australian dollar terms decreased slightly year on year mainly due to lower benefit recognised from the decline in interest rates than in the prior year. However, due to depreciation of the yen against the Australian dollar, we recognised double digit growth in TAL's net income in yen terms, which contributed to the group profit.