No screams and howls on IP, but some concerns
New Zealand hasn’t had the same problems with income protection claims as in Australia, but there is more companies can do to avoid potential problems, particularly around mental health claims.
Thursday, June 25th 2015, 11:15AM 
2 Comments
Partners Life managing director Naomi Ballantyne says the New Zealand income protection market is pretty stable and it has had some of the crazy underwriting practices that have taken place in Australia.
The problems in Australia have led reinsurer Munich Re to review how it underwrites these policies and how it make the product sustainable. (Full details here)
Ballantyne says she is not hearing any “screams or howls” from life insurers about the product, but she says increasing mental health claims are a concern.
She says the percentage of mental health claims on income protection is higher than the percentage of mental health issues made each year.
This indicates people with policies have some attitudinal issues to work and are using their policy payouts as an alternative income source.
“I’m not sure the policy is the problem,” she says.
Ballantyne says life companies could do more screening at application time and improve their underwriting in this area.
The idea would be to try and screen applicants’ attitude to work.
This could include questions like how many ad hoc sick days had people had off work; how often had they changed jobs and have there been any performance issues at work.
She said these sorts of questions could be asked as life companies already ask personal questions such as where they work and how much they earn.
Ballantyne says if there were major problems like in Australia then premiums would be increasing swiftly.
Earlier this year Partners Life increased its income protection premiums, but this was really in response to claims on trauma policies.
She said the company chose to spread the costs across the two products rather than put them all into trauma premiums.
It is unclear which life companies in New Zealand have reinsurance treaties with Munich Re.
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Comments from our readers
NZ Has, or has not had some of the crazy underwriting seen in Aussie?
I don't think NZ has had some of unbelievable underwriting that Aussie has had. And we have ACC, so it's a bit silly to compare any country to us without making big allowances for that. Lots of countries have studied NZ's ACC system and they both envy and admire our ability to build and sustain it.
Since the first IP policies there has been a higher "incidence" among policy holders than the general population. This is not a new problem, and insurers knew about it when they wrote their current policies.
Now Naomi: The product is the problem, and Partners can take a big share in the responsibility here, along with all the insurers:
-Ratings games (nuff said)
-commission wars (nuff said)
-pricing wars consistently under-pricing the product in target age groups, then whacking clients as they age (is it not convenient for insurers that the average age of lapse is what? 46? and the average age of claim is 47) that's a lot of premiums paid without claim
-poor claims management - much more needs to be done to understand and intervene potential long term claims
-you can't blame people for reading their policy, lawyering up, and going after their entitlements. Yet that is how one might interpret Naomi's comment.
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Or a fixed claim period for mental health claims - say 2 years max?
I'm sure my colleagues out there will have other constructive ideas. I would hate to see Income Protection/Disability cover become ever dearer in the future as it's hard enough to sell now. Your thoughts?