About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Tuesday, December 23rd, 6:19AM
rss
Latest Headlines

Disability news gets worse

The outlook for disability, or income protection, policies is getting worse, according to an expert in the field.

Wednesday, October 17th 2001, 9:57PM

Disability Income insurance has been a bad experience for insurers, General Cologne Re's Australian general manager Michael Molesworth says.

He warns that premiums must rise and some benefits will go to keep the product sustainable.

"Rates probably should go up every year," he says.

Molesworth was speaking at an industry seminar where Sovereign announced that its premiums will rise by between 3.5% and 25%.

Rates for Colonial, Prudential and MetLife are under review.

Sovereign’s health insurance rates will also rise by between 15% and 24%.

Unexpectedly high claims mean DI has been unprofitable for many companies around the world, Molesworth says.

Although data from 1995 to 1999 shows the incidence of claims in New Zealand has been lower than expected compared with United States experience, the duration of claims has been much longer.

For some client and product groups, claims duration had been two or three times the US experience.

Molesworth says DI was badly managed during the 1980s and early 1990s. In an attempt to win market share, premiums were held down, while benefits were added and underwriting standards relaxed. Claims management was poor and advisers were able to slip clients into lower risk/lower premium occupational categories.

As a result, "DI has been a bad experience and it’s getting worse".

In order to keep the "Rolls Royce" DI products New Zealand has premiums must rise for new and existing customers, he says.

There must be a fall in maximum and monthly benefits, which were more generous here than in the US, relative to living standards.

Occupational categories and underwriting standards must be tightened. Personal statements by clients, used to disclose existing conditions, must be more thorough.

Claims management, aimed at getting clients back to work, must improve.

"The companies that do claims management well will be the ones that survive."

Inquiries to identify fraudulent claims will also increase.

Lifetime benefits must go, while exclusions should be included for subjective conditions open to abuse, such as mental disorders.

Molesworth says eventually DI is likely to become a specialist product offered by just a few insurers.

« RSA's solvency OKFears health tax may hurt insurers »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
Strategy Thoughts

Tip from the top

Fidelity Income Protection
Changes to the wording make it easier to issue policies, but advisers should be careful about proof of income.

News Bites
Latest Comments
  • FMA: Mount was pre-regulation
    “Surely the lesson to be learned centres on whether the current regulatory regime would have detected and/or prevented this...”
    1 day ago by dcwhyte
  • QFEs call for simplification
    “I believe that all advisers should personally be registered or licensed for the services that they provide. Whether working...”
    4 days ago by I was wondering
  • Fund brings active and passive together
    “Hi Brent Sheather Not sure if SmartShares website is accurate or not but the 3.2% & 2.8% relate to the NZX Midcap (to...”
    4 days ago by noidea
  • Fund brings active and passive together
    “Hi Bobby WTF indeed but the WTF should be directed to MJW who may well be on serious drugs. SmartFONZ actually returned,...”
    4 days ago by Brent Sheather
  • Fund brings active and passive together
    “I don't read MJW but FundSource correctly has FNZ ETF returning 2.8% for the Sept quarter. Happy to send you a copy of the...”
    4 days ago by samstanley
Subscribe Now

Cover Notes - Specific news aimed at risk advisers

Previous News

MORE NEWS»

Most Commented On
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by PHP Developer and eyelovedesign.com