Reinsurers now wary of disability contracts
Monday, February 12th 2001, 1:14PM
Just as some are questioning the viability of disability insurance contracts two companies are bringing out new products.
Tower Health launched its new range of life insurance products, which includes disability, trauma and life cover to brokers in Auckland on Friday and Club Life is also looking to include income protection in its product line up due for launch around June 1.
Concerns have been expressed over the future of disability contracts because of poor claims experience and huge losses. The problem areas are mainly in stress related claims.
New Zealand companies have had problems and some companies have made significant losses on their disability book. However, the local experience hasn't been as bad as the worst affected countries.
Although the New Zealand situation hasn't been as bad as overseas, it was (as reported earlier) one of the reasons why re insurers Swiss Re decided to close its Wellington office last month and move back to Sydney.
Tower Health managing director Jim Minto says its taken more than a year to put the income protection product together, and one of the sticking points was finding a reinsurer which would be prepared to cover the business.
"We have had difficulty getting reinsurers to come to the party," he says.
Some just weren't even interested and others put very large prices on the business because of difficulties with the product.
At the end of the day it came down to a shoot out between two reinsurers.
Minto says the product will be profitable for Tower, and its claims management will be fair.
Club Life's chief executive Naomi Ballantyne says a life company couldn't go to the market without a disability product.
It is often sold packaged up with life cover, plus it is the second biggest area of business in the market.
According to the Investment Savings and Insurance Association 4259 individual policies, generating premium income of $4.76 million were written in the three months ending December 31. Term life was biggest area of new business in the quarter.
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