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Demand for simpler trauma policies

Demand is increasing for simple trauma products with cheaper premiums, Fidelity Life boss Milton Jennings says.

Monday, January 19th 2015, 6:00AM 3 Comments

by Susan Edmunds

Premiums have increased as claims soared and insurers face larger tax bills.

Policy definitions have widened, leading to significant claims payouts for trauma and income protection policies. Grandfathering provisions on income tax for life insurers run out at the end of June this year.

“It will be challenging to get premium increases through to cover that tax increase,” Jennings said. “We’ve seen just about every company put rates up over the year, even Partners Life which is not subject to the old rules. The rates are going up because of tax and because of the amount of trauma and income protection claims coming through. It’s not good for the consumer or for us either because we hate putting premium increases through, we always lose quite a few policy-holders who can’t afford it, especially when it comes with age-related increases. We end up with people cancelling policies just when they need them most.”

Advisers could warn their clients that premium increases might be coming, Jennings said.  “For the last 10 years insurers have kept widening and widening benefits and kept increasing medical limits so more people are going through as standard and more are able to make claims.”
He said he could not see the situation changing any time soon.

“Until they get rid of research houses I can’t see insurers pulling back. Companies want to be at the top of research houses’ lists with products and the only way to get there is by widening benefits. I can’t see an end unless we get one of those big losses like have come through in Australia, something that prompts an industry-wide correction.”

In Australia, CBA has so far paid out A$52 million in compensation to clients who received bad advice.

Jennings said companies would offer simple trauma products for those who could not afford the more comprehensive policies “We’ve always had the more stripped-down version but it hasn’t sold well. Advisers want to recommend the policy with full benefits and sell the best product possible. But with prices starting to climb there is demand coming in for simpler trauma products.”

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Comments from our readers

On 20 January 2015 at 7:59 am KeninNZ said:
20 years ago when living in the UK I had an excellent accident policy. For 15 pounds a month my wife and myself had up to 2 million pounds of cover in the event that we ended up permanently in a wheelchair. The policy had various cover levels for less life changing accidents. I viewed it as cover that was there for a disaster, not cover for a problem. As we were both into cycling and mountain biking I viewed it as good value. The only exclusion was non commercial air sports. Nothing approaching that has been available since we moved to NZ.
On 22 January 2015 at 12:15 pm Wall said:
The Lifecare product that Fidelity offer is a good way around the problem.

I think a lot of people do not understand it.

Appreciate your comment Milton.
On 28 January 2015 at 5:26 pm billy the broker said:
Maybe Milton and the other Head Honchos should maybe suck the Sav a bit and dial down their profit margins eh! And dont give me this propaganda of how many claims you have paid out,it is just a fraction of what you cream off the top. And who suffers, yep you got it "Joe Public!!". Stop putting this diatribe up as a veiled info piece, when its obvious its a sell to the public for new product!! And we hear how there is now best practice with compliance. It would be good if it applied to the hierarchy as well. Double standards y'all...

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