Sovereign cuts life premiums to be competitive

Sovereign is dropping its premium increase for new life insurance customers from 15% to 5.27% as it looks to remain competitive in the life insurance market.

Tuesday, August 17th 2010, 7:51PM 1 Comment

by Jenha White

The reduction follows an insurance tax overhaul that took effect last month and led to increased premiums across the industry, including at Sovereign.

Policyholders who had life cover issued since July 1 will receive a credit on their policy and existing life cover policyholders with policies in force prior to 1 July will receive their discount at their next policy anniversary date from 1 October.

Sovereign general manager of marketing and product David Drillien says now that the industry has had a chance to adjust to the new tax regime, Sovereign has carefully considered its ability to absorb a greater share of the impact of the changes.

From 16 August, base rates were reduced for new and existing TotalCareMax Life Cover Rate for Age (‘RFA'), Level 10 year and Family Protection benefits (RFA and Level 10 year).

In addition, Sovereign completed a separate review and confirmed that Large Sum Assured discounts (above $500k) will also increase for these Life Cover benefits.

Drillien says Sovereign's goal all along has been to minimise the impact of this long-overdue tax reform on its policyholders.

"We've made this decision after a detailed analysis of the effects of the tax changes and of the feedback from our advisers."

Chatswood Consulting director Russell Hutchinson says Sovereign life rates tend to be in the top half of the industry, so with other life companies increasing their new business premiums by lesser amounts, Sovereign was in an unfavourable position competitively and needed to respond.

Strategy Financial Services director Graeme Lindsay agrees saying Sovereign was one of the first cab off the ranks to announce its premium increase and it has not been competitive for new business for the last six weeks because premium increases by other companies were lower.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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