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QBE spikes LMI premiums by 9%, cites risk of 'long term' volatility

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Australian Broker | 21 Aug 2013, 08:00 AM Agree 0
Insurance giant QBE has raised its LMI premiums by 9%, despite falling mortgage default rates
  • mac | 21 Aug 2013, 09:26 AM Agree 0
    "while separate results filed for QBE’s LMI division in April showed combined operating ratio was 64%" - I don't know the insurance industry well but this seem very high to me after a quick Google it equates to a 36% profit margin.
  • Chappo | 21 Aug 2013, 10:11 AM Agree 0
    "Neal says QBE's pricing is similar to that of its only major competitor" (Genworth). What a surprise!? We need the new Federal Govt to legislate for LMI to be transferrable when refinancing as one way of reducing the burden on borrowers.
  • Pablo | 21 Aug 2013, 10:13 AM Agree 0
    On my book (a 9 year old book) in SA I have had no claims on any of my deals. Despite probably my clients paying over a million dollars in premiums. This insurance is a taking advantage of innocent people and should be investigated. Or at lest make the premiums or locations more accountable to risk (like car insurance). And what long term insurance product refuses to pay back a refund if the contract is cancelled???? PLEASE INVESTIGATE THIS RIP OFF INDUSTRY
  • Brisbane Broker | 21 Aug 2013, 10:17 AM Agree 0
    ‘‘When someone pays us a premium in 2013, we think the life of the policy is between nine and ten years…

    this is nice word 'THINK'. As far as I know life of the loan is not 9-10 years it is 3-4years before they will refinance.

    Nice try John.
  • Dan | 21 Aug 2013, 10:17 AM Agree 0
    Nice one QBE. With this kind of thinking, it's clear you have learned a lot from being so closely associated with the banks.
  • wayne | 21 Aug 2013, 10:20 AM Agree 0
    If the life of the policy is 9-10 years, then the life of the loan must be the same. I thought the average loan went for less than half that time frame. Also, does this suggest that property values in 9-10 years have remained static to today's values. What parameters are they using here, or is it just profit driven like most other of Australia's oligarchy companies.
  • Joo | 21 Aug 2013, 10:21 AM Agree 0
    More excuses for improving bottom line for a duopoly! Perhaps the ACCC should have a look st this. I don't buy it!
  • Ian Graham | 21 Aug 2013, 10:33 AM Agree 0
    So why is anyone surprised. This is what happens when there is next to no competition in an industry. Hey why not jack up the interest rates on all loans on the basis that they might go up some time in the future, wouldn't this be analogous to increasing premiums on the basis of some imagined future risk? Given the low rates of default and the lending criteria of the majors why do we need this "service". Surely if the banks are lending in a responsible manner according to law they should have to bear their own risk.
  • Observer | 21 Aug 2013, 10:34 AM Agree 0
    The only reason that Genworth and QBE have increased their premium rates is because THEY CAN.

    Lack of competition in this market is the root cause of the problem.
  • Andy | 21 Aug 2013, 10:37 AM Agree 0
    Whilst I too believe LMI is a bit of a rort, I would like to know why lenders do not have to reflect LMI costs into a comparison rate. We may not believe the rates charged by QBE & Genworth to be fair, but is it fair for lenders to hide LMI costs (in respect to true interest rates) particularly when the LMI is capitalised. There are far too many costs associated with home buying in Australia.
  • Stewart | 21 Aug 2013, 10:54 AM Agree 0
    Just another corporate in this country operating on "PURE GREED" . Add them to the list of companies that just wants to rip people off.

    Time Australians started standing up for themselves. 25 years ago, an english TV channel & 60 minutes covered it also, did a story on the future of the Australian economy. Bad news was the end result.
    Main comment was:- Australia will be in trouble with the attitude of "she'll be right mate" .

    Guess what - we're in trouble!!
  • PeterT | 21 Aug 2013, 11:09 AM Agree 0
    What an utter load of rubbish. Like others I agree that the life of a loan is not 9-10 years, but it's even worse than this. Genworth only pays whent he lender can't recoup their losses via a sale. Over a 5 year period almost all property in Australia has increased in value so its unlikely that an LMI payout would be required. For those areas that don't increase, they've been designated cat 5 and you're unlikely to get LMI approval regardless.
  • Nicklas B | 21 Aug 2013, 11:12 AM Agree 0
    Unbelievable - a combined ratio of 64%!
    QBE's overall target is 90%, which would be a very very good result.
    Tower, IAG and Suncorp have ratios between 95 and 107%.
    64% would only be possible in a price rigged duopoly. To even officially comment that the pricing is similar to the competitor's shows the disdain they have for the consumers.
  • Incognito | 21 Aug 2013, 11:21 AM Agree 0
    Can we set up a broker co-operative LMI fund?

    Aggregators? MFAA? Brokers?? Australia Post even.. Anyone?

    We won't write deals we don't back, plus we'll undercut this rent by about 30%.

    Talk about super-profits.

    NOT ONE of my LMI deals has even come close to making a call in 11+ years.
  • Perth Broker | 21 Aug 2013, 11:39 AM Agree 0
    Now what would we expect from price gougers like Genworth and QBE. You could also add price collabaration to that as well. In 14 years as a broker I have never had one of my deals called upon under LMI. Simply a licence to print money from the Mortgage Insurers. Unfortunately most of the deals in LMI territory are assessed at LMI level by assessors who have never had any practical lending experience or they are simply failed lenders in a previous life!
  • Broker | 21 Aug 2013, 12:38 PM Agree 0
    Stewart - You have hit the nail on the head.

    The mantra for Australian corporate companies that have us all by the goolies is to gauge as much as possible, as often as possible for as long as possible , on all the stuff we have no or little choice but to use. (Ideally all run by cheap offshore labour.......)

    Think - Banking – LMI - Gas – Electricity- Water - Fuel – Car rego – Health Insurance – Tolls – Internet- Mobiles - State Gov taxes and fines- Local Gov taxes and fines.

    Price Fixing and collusion is now the ‘Australian Way’ to conduct business as these companies all know too well that our Governments are weak as you know what.

    Perhaps if our greedy banks passed on the rate reductions to home loans and let’s not forget credit cards too ( which have seen close to zero rate reductions in 5 years despite rates dropping by approx 5.00%, another absolute rort by the banks, Joe Public may have some cash left in his pocket to pay for all this crap!

    And people wonder why our economy is just about’s because the money tank is dry, as they have just about emptied everybody’s pockets.

    It is going to be a long rocky ride...
  • Papery | 21 Aug 2013, 02:06 PM Agree 0
    Agree with all the commentary folks.... one more point to add....why the hell are the Banks loading their interest rates even more for >80% LVR loans....The clients are already being slugged with a ridiculous LMI premium to cover he risk...why are the Lenders allowed to take an additional bits as well? Pricing for Risk....PFFFTTT!!
  • Joo | 21 Aug 2013, 04:26 PM Agree 0
    More excuses for improving bottom line for a duopoly! Perhaps the ACCC should have a look st this. I don't buy it!
  • Interesting | 21 Aug 2013, 04:29 PM Agree 0
    So no doubt if the crash doesn't happen, they will re-imburse all the clients they took the extra 9% from?? If your smiling reading this, because we all know the answer to that. - maybe we should invoke a 'clawback'.

    So what is the premium increase over the 4 years? must be pushing 30% in total.
  • Positive Broker | 23 Aug 2013, 08:08 AM Agree 0
    As someone who has worked for both LMI companies in the past I hate to burst your bubble but they do actually pay claims, thats a fact. And they were instrumental in supporting non banks and high LVRs. The underlying issue is lack of competition. There is no pressure to keep premiums down.
  • QLD Broker | 27 Aug 2013, 10:59 AM Agree 0
    Mortgage Insurance was originally created and performed by a Government Body called the Housing Loans Insurance Corporation,(HLIC) to help people get into their own home. Like everything else it was sold off and privatised. Now it has become a very expensive cash cow for insurance companies rather than the non profit corporation that simply covered costs. Once again the privatisation of assets that should never have been sold as it was set up to benefit citizens, not multinational insurance companies. Greed is not good.
  • pete | 15 Oct 2013, 05:08 PM Agree 0
    QBE needs a lift in premiums to cover the loss of millions they incurred in US in damages after courts there found them to act fraudulently and in bad faith. Google it.
  • SEQ BRoker | 21 Oct 2013, 04:35 PM Agree 0
    Agree fully Chappo.

    The premiums are high enough to justify being transferable. If they came out and publicised policy like so long as the LVR doesnt rise they will transfer, you think that would be fair wouldn't you. But nope they have shareholders now.
    IMO LMI offers a great service for people with small deposits being able to get into property - setting their lives up for the future, but the cost needs to be a one off.
  • TK | 25 Jun 2015, 08:02 PM Agree 0
    Companies in the LMI business should be governed by an independant industry body/ies elected by the government to manage these unfair high premiums; to protect the housing industry, investment and home ownership for the Australian people's benefit, therefore to the advantage and benefit overall.
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