Sovereign disputes AIA's claims

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In the on-going debate about the tax treatment of income protection policies, Sovereign disputes interpretations made by AIA.

Tuesday, July 27th 2004, 9:41AM

"Sovereign, like most of the insurance industry, is following the IRD’s 1994 policy position, which was reconfirmed by the IRD in 1999 and 2004. This provides a high degree of tax certainty for insurance companies, advisers and their customers," Sovereign managing director Simon Swanson says.

"Bernard McCrea, general manager of American International Assurance (AIA), claims the 1994 policy statement from the IRD is open to more than one interpretation, and they have accordingly structured their income protection products differently to those of the industry at large," Swanson says in a statement.

"AIA income protection product clients need to be aware that there is no formal IRD support for AIA’s alternative interpretation of the policy.

"This creates potential risks for both advisers who recommend these products and holders of these AIA products," Swanson says.

He also disputes AIA's claims as being the ‘the country’s largest underwriter of disability income business’.

According to recent industry figures Sovereign has approximately four times the existing disability business and more than twice the new business of AIA, Swanson says.

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