Premium hike fears dismissed
Claims life insurance premiums could rise by as much as 20% have been rejected by a number of insurance industry figures.
Wednesday, January 30th 2013, 9:27AM
by Benn Bathgate
Deloitte tax expert Greg Haddon said life premiums would increase as insurers looked to claw back losses caused by tax changes implemented in 2010.
But Partners Life managing director Naomi Ballantyne said competition in the insurance market meant insurers might not pass on additional costs to consumers in the form of higher premiums.
“There were some products where the tax changes were grandfathered and those products are likely to experience price increases,” she said.
“But it depends on whether you’ve got a company actively pursuing new business – which makes your competitive pricing an issue – or you’ve got a company that is not so focused on new business.”
She said QFEs might be more inclined to make premium increases as their advisers couldn’t place the business elsewhere, something she said some insurers would be wary of.
“It creates an issue for you ultimately with persistency if other advisers stumble across those clients and can demonstrate to them that economically, they’re better off to move,” she said.
“It depends on what’s driving those companies, if they want to increase the profitability of their existing book and they’re not interested in new business then that will drive different behaviour than if they are actively wanting to play in the new business market or compete with independent advisers who have choice.”
Abbott Group’s Derrick Abbott echoed Ballantyne’s comments about competition fears among insurers.
“I think that any insurer that put an increase out there like that would do so at their peril,” he said.
“Their competitors would take advantage by absorbing as much as possible [of the tax rises] in the interim, hoping to gain market share.”
Insurance industry veteran Ron Flood said insurers had also factored in the tax changes with incremental premium rises since 2010.
“Premiums are not going to go up 20% from today. Companies have been gradually putting premiums up over the last year-and-a-half, two-years in anticipation,” he said.
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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