Pinnacle says no justification for some premium increases
Pinnacle Life explains its premium increases and accuses other life insurance companies of making unjustified increases to policies.
Friday, May 28th 2010, 11:35AM 23 Comments
Pinnacle Life calculates that insurers will need to increase life insurance premiums by around 20% on new policies sold from July 1 to neutralise the effect of the tax change on bottom-line profitability.
However no insurer has made increases of this magnitude.
Pinnacle Life partner Ed Saul says Pinnacle plans to increase prices on new policies by 10% from July 1, followed by several small increases of less than 3% over the next three years until margins are restored to previous levels.
"Pinnacle Life will honour its commitments to all existing policyholders who have already been told what their premiums will be for the next five years and whose policies fall under the grandfathering provisions of the new legislation," he says.
Saul says Pinnacle is "fully committed to maintaining its position as the lowest cost life insurer in New Zealand."
"Pinnacle Life's historical proposition to replace other company's life insurance policies for 20% lower premiums, subject to good health, will continue unchanged."
Pinnacle Life managing partner, Noel Vaughan, says that any insurer that increases premiums on new policies by less than around 20% in the current year will need to further increase premiums in subsequent years to claw back margins.
"We note however that few insurers are mentioning anything about further increases so it's possible these insurers are withholding this information from consumers for the time being."
He says there is no justification for life insurers to immediately increase premiums on their existing policies.
"The new tax regulations only apply to new policies sold after 1 July 2010. Pre-existing policies on the other hand are tax-exempt (grandfathered) for a period of at least five years."
"Increasing premiums on pre-existing policies suggests some insurers are planning to extract additional revenues from existing customers to cross subsidise losses on policies for new customers. "
« Time running out for life companies to announce premium increases | AIA increases premiums by 13% » |
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Comments from our readers
Their advert depicts something along the lines that the industry that uses brokers somehow increases the premium...That's complete bunkum and what's more most of their sales come from brokers.
Sounds to me like pinnacle has lack of profitability, and therefore is more sensitive to the changes, and consequently are trying to justify the largest premium-hike announcement yet. 10+3+3+3 = 19%
Luckliy enough for us Pinnacle really operate in a different space and most of my clients understand the differences.
Pinnacle life spends significantly on radio/TV advertising and employs its own underwriters… fair to say that Pinnacle Life pays its own way for new business; it doesn’t “piggy-back” off others.
It’s patronising to suggest consumers are illiterate and can’t understand a straightforward policy document, particularly when Pinnacle Life won the NZ WriteMark plain English Awards in 2009 for its clear and understandable policy wording.
Churn is an unfortunate and indisputable part of our industry. We can only assume that Majella is saying it’s NOT shameless for an adviser to churn a policy to achieve a 5% saving for a client and earn 220% commission… whereas it IS shameless for an adviser to switch a policy to Pinnacle Life to achieve a 20% saving for a client and only earn a 75% commission… hmmm
Adrian - I'm sorry if you've been 'blackmailed' If so, then you were NOT advised well. But believe me, propert advice from an experienced risk analyst is invaluable. I recently met new prospects who had been "sold" life insurance by their mortgage broker. There was no wortten analysis or advice/justificaiton for the products put in place. My analysis showed they were seriously oversold, with inappropriately constructed riders (standalone trauma, NO TPD or income protection). After a reworking of the benefits, with the same company please note (no churning), I actually REDUCED their insurance expense and they now understand what they have & why they have it. What's more, as it was not churned to another provider, they happily paid a substantial fee for the advice they needed.
But:
Thanks for raising the issue of CHURN Steve. When I decide that my future lies in recycling policies, I'll apply my Pinnacle agency.
I know that you will take the client at 80% of whatever premium they currently pay (USP), with no underwriting (easy sale) and you'll pay me. Until then....
Adrian. Good to see "Clients" of the industry making contributions to this site. Thanks.
And good on you for taking out life cover.
Should you ever decide that you would like a full appraisal of your risks, and to take cover from a company that can actually offer all the types of cover you require, and if you would like good advice on selecting then working with your insurers both at the beginning then (most importantly) when claiming, please call one of 'us'.
For now, I'm sure you are quite happy dealing a crowd who have established a business model of telling you what you want to hear.
Pinnacle Life fully underwrites every policy it issues.
If you go to the Pinnacle website and proceed to either purchase a new policy or apply to switch your existing policy, you will see that a full set of underwriting questions will be asked via Pinnacle's electronic underwriting engine. Any applications that the engine can't deal with are then manually assessed via Pinnacle's underwriting team.
Pinnacle will always serve a place for people who are blinkered in their views about insurance agents.
You will never ever be able to sell/please those kind of people with your advice. No matter how you do your business.
Their opinion is we do this to chase high commissions for doing little work, they don't appreciate the back room etc etc. Plus now exams and this compliance stuff to go with it.
Pinnacle have their niche market, let them deal with people like Adrian, because you don't want a client like that anyway. Not worth the hassle!!
And again for the brokers who do think you are a little bit better! There is a place for moving a bit of business if it benefits the client, it is the hierarchy that has made "the churn" look like a bad thing. When they started it in the first place.
And as for Majella get of your pedestal, I've seen to many of your kind at seminars. You are no different than Adrian, get over yourself and carry on.
"They do promote that their premiums as 20% cheaper if you change over to them. So if a client rings up you need to know what they offer:
1. One million is the max on life cover
2. Trauma cover is not trauma cover, in fact if covers cancers ONLY, how this can be trauma cover has me perplexed. This trauma cover has a maximum of $250.000 (if you suffer from cancer)
3. To buy this product you have to be ages between 20-59, no cover for kids. The sum assured is also only applicable if you live in NZ, Australia, US, Canada, UK, Ireland, Hong Kong or Singapore. Fiji is out!
4. Each year they may offer the opportunity to increase your cover to keep pace with inflation.
So if one of your clients rings you and says that Pinnacle is cheap, you can answer “YES THEY ARE” "
!
1. What you are calling trauma cover, we have very clearly called cancer cover. Not sure why you are misquoting the name.
2. The cover applies anywhere in the world, but you will be paid out only in NZDollars. (Pretty normal)
3. The countries listed are those where you can 'buy' the cover online. Pinnacle Life is the only insurer in NZ selling a NZ insurance product outside of NZ's borders.
If advisers are getting even these few facts wrong, it doesn't bode well for representing even more complicated products.
Are you defending the Pinnacle advertisements on television? The timing and the content of your advertisements are despicable.
Classic.
Thanks everyone.
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