Press release 31 January 2008

Pinnacle Life today increased its electronic underwriting limits by 60% enabling it to offer life cover up to $800,000 instantly online.   

“This opens our instant life cover product to a wider audience” says Ed Saul, a partner of Pinnacle Life. “You can now insure your life for $800,000 without a medical and get your policy straight away.” 

Pinnacle Life first launched its internet-based life insurance product with electronic underwriting in May 2007 with a limit of $500,000. The buying process from application to policy issue is fully automated, with consumers receiving their policies online. Applicants are led through a series of typical insurance underwriting questions covering their health, lifestyle, occupation and pastimes. Those with no indicated health risks can complete the process – from quote to policy document – in less than 10 minutes.

“We previously offered cover to $500,000 thinking it would be enough for our market” says Saul. “However our limit came under pressure with increasing numbers of consumers seeking the convenience of instant cover for yet larger policies. We’ve now responded with $800,000 available at the click of a mouse. The increased limit enables our on-line offering to compete more directly with paper-based products sold by traditional life insurers and banks.”

Pinnacle Life’s $800,000 electronic underwriting limit is backed by Hannover Re, the largest reinsurer of life-risk products in Australasia. “The endorsement by Hannover Re of our 60% increase reflects their confidence in the quality of our electronic underwriting system launched almost a year ago together with their ongoing support for on-line life insurance” says Saul.   

Here’s something a lot of people don’t know so we thought we’d mention it on our Blog. If you already have a life insurance policy, you can reduce your life insurance premiums by a whopping 20% simply by switching your policy across to Pinnacle Life.  

Pinnacle Life offers a guaranteed 20%-off whatever you are currently paying. For some people in their 40’s and 50’s that can be a lot of money.  Consider a 48 year-old male smoker – for example – they’re probably paying over $140 per month for $350,000 life cover.  Switching to Pinnacle Life would save them around $340 per annum… for the same $350,000 life cover! 

How do Pinnacle Life do it?  Simply by running an efficient, online business. So if you’re interested in saving 20% on your premiums every year for the life of your policy, just go to the Pinnacle Life website and chose the option that says ‘switch to Pinnacle Life’.  

Ok, this is a boring read (I admit it ok?) – but important for you (the consumer) to note if you are in the market for life insurance in future.

Background

In 1990, New Zealand enacted new tax rules for life insurance products. Consequently, life insurance companies today are taxed at a lower rate compared with other companies. The proposed tax changes are ostensibly to ‘remedy’ this situation.

Proposed tax changes

The NZ government is proposing to change the basis for taxing life insurance companies. Click here to read the government’s discussion document which proposes that new tax rules will fully apply to all new life insurance policies taken out from 1 April 2009.  The government has called for submissions from interested parties, closing 12 Feb 2008, so there’s still a chance that further changes to the proposal will be made.

My assessment

With only 4 mil people and around 15 life insurers (if you include the banks), the life insurance industry in NZ is very, very competitive. Over the past 17 years, insurance companies have continually reduced their life insurance premiums to stay competitive. So, whilst life insurers may have started off with higher profit margins when the 1990 tax rules were introduced, today (17 years later) profit margins would have normalised and the tax advantage the industry once enjoyed is basically ‘factored into’ the price of life insurance.

What does this mean for consumers?

It means that today, the consumer is benefiting from the advantageous taxation laws for life insurance – not the life insurance companies. And whilst increasing tax on life insurance certainly sounds like the right thing to do, it will most likely result in unsustainable margins for life insurers, who will have no option but to pass this taxation change on to the consumer in the form of higher life insurance premiums.

So, in a nutshell…

If the taxation laws are changed along the lines currently proposed by the NZ government, consumers should expect an increase in life insurance premiums in future.

How much will life insurance premiums increase?  I’d expect the current proposal to drive up premiums by 15%. But let’s not get ahead of ourselves – we’ll just have to wait and see the extent of the tax changes the NZ government pushes through.

Call this a ‘heads up’.

We thought we’d start the New Year reminding New Zealanders exactly why buying life insurance on-line is a great idea.

Obviously this assumes you need life insurance… which you do if you have a family that is financially dependant on you… because you don’t know when you’re going to die. Also assumes you’re ‘online’ and you like to do your business quickly and efficiently. That’d be just about everyone today – you’d think?

If you already know it’s a great idea, click here to buy life insurance online now… do not pass go etc….  Otherwise, read on… Here are the 5 best reasons I can think of to buy your life insurance online;

#1: Because it’s quick and easy to do

Isn’t that why most people do their business on the internet?  Click… click… click… click… done!!  If you can find an easier way to buy life insurance, tell us… and we’ll spread the word.  It used to take days, weeks or even months buying through an agent.  Now it takes just minutes.

#2: Because you’re buying a product you can understand

Traditional life insurance products are complicated – it was never easy to fathom exactly what you were buying – until now. Just for a laugh, see what a policy looks like with all the legal-mumbo-jumbo and the insurance-speak removed. See how it feels to read a policy in ‘everyday’ English.

#3: Because it’s anonymous

Not everyone is comfortable sitting with an insurance agent answering all those highly personal and sometimes embarrassing health questions. Given half a chance, most people prefer to manage their personal affairs… umm… privately. Life insurance is after all a private matter and the internet gives you the opportunity to keep it so.

#4: Because it costs less

That’s the wonderful thing about the internet. Everything is done quickly and efficiently. Its all just mouse clicks. Gone are the layers and layers of cost those traditional life insurance companies lay on. People, paper, postage… the internet does away with all that.  That’s why buying life insurance online costs less… way less.

#5: Because you can

Until recently the only way you could but life insurance was through an insurance agent… now its available on-line. The question is no longer “why would anyone want to buy life insurance on-line?”… the question has become “why wouldn’t you?”

So… even if it’s only to pique your interest or to check out the low insurance premiums, click here to buy life insurance direct, online.

And if you have already purchased life insurance online, interested in your thoughts… leave a comment.