Driving into work last week I was surprised to hear the chief executive of the ISI (that’s the Investment, Savings and Insurance Association) announce on behalf of the insurance industry a 20 to 25% increase in the price of risk life insurance products due to the change in the tax act.

Having the ISI act as the messenger is real convenient for the insurance companies and banks – they don’t have to fess-up to policy holders about their intended price hikes. Who would want that sort of bad publicity! Better to have the Chief Executive (Vance Arkinstall) of the ISI announce the price hikes – who cares about the ISI brand anyway? 

Well many thanks Vance… but please don’t speak for Pinnacle Life.

Pinnacle has no intention of increasing its prices 20 to 25%. We suggest that a 20 to 25% increase in prices is more about an opportunity to restore the flagging profitability of life insurance companies than offsetting new taxes.

The change in the tax act was inevitable and has been on the cards for a number of years now. We blogged about the new tax act as far back as January 2008… see our blog here. 

Banks and Life Insurers alike have used the peculiarity of the Life Insurance Tax Act to reduce their tax burden.  With the tax law as it currently stands, it is nigh on impossible for life insurers to make a taxable profit on life insurance. In fact, the more policies you sell the greater the tax credit generated.  And we don’t have to look very far back to see how reluctant Banks are to pay their fair share of the tax burden (hint BNZ v IRD)… clearly the insurance tax law has needed an update for quite some time.

The cost of ‘tax’ is already built into insurance premiums; as are admin costs and commissions. How many Life Insurance companies can put their hands up to show any meaningful reduction in admin or selling costs for life insurance, even though we have experienced a huge technology wave in past 20 years? And how many life insurance companies can put their hands up and show how they’ve invested their tax credits back into R&D, or have given the consumer a rebate? I bet none. They took the credits and got fat… now they invoke the weasel clause “if for any reason there is a change in NZ law which affects how we determine the premium, we have the right to increase our prices”. And as long as we have this protective measure, what incentive is there to gain cost efficiencies and plan for the expected?  

Nah, price hikes are just a matter of recouping losses and standing behind the cloak of the ISI.

 Ever wondered why insurance documents can’t be written in plain, simple, non-legal English?

Well actually… they can!  

Last week, Pinnacle Life won the New Zealand 2009 Best Plain English Document Award (Private Sector).

This award was presented in Wellington at the Plain English Awards run by WriteMark New Zealand.

Pinnacle Life won this award for its life insurance policy document described by judges as “clear, sophisticated” and “as good as it gets”.

Not only was Pinnacle Life a winner in the best document category, but the Pinnacle Life website was a finalist in the “Plain English Website Awards”.

So… no need to put up with insurance jargon any longer or wrestle with legal English… just go online and see for yourself why Pinnacle Life is not your regular, old fashioned, overpriced life insurance company.

And here’s the highlight… Kerry Vaughan (Marketing Manager Pinnacle Life) picking up the trophy presented in Wellington.

In July we commented on a very public story relating to an insurer voiding a policy for non-disclosure.  We commented on the story based on information that was available to the public - that’s all the information we had available to us at that time.

Our view then was that the insured person did not disclose certain facts and the insurer was within its rights to void the policy.

In case you missed it, read our previous story PART I here.

The story is especially tragic because the insured person, Wayne Croft, has contracted cancer, is now terminally ill and is in serious financial difficulty. We suggested then that Wayne had only himself to blame for the predicament he is in.

Well now we’re thinking… not so!

In the past few days we’ve been sent some unsolicited details about this case suggesting we may owe Wayne an apology for our earlier comments. And given the tragic circumstances, we feel it’s necessary to add balance to our previous comments.  We now think Wayne’s the victim in this ugly mess.

You see, here’s the thing.

When an insurer offers you a policy, they do so with the information you provide them.  If you hide details about your health when you apply, they have the right to void your policy if they catch you out later on. That’s how it works.

But…

What if the health information you provide to the insurance company is so grossly inadequate they’re in no position based on this information to underwrite your application and make you an offer? What if you say on your application that you have a health problem but don’t give details? What if the insurance company simply ignores these red flags and the inadequate information and offers you a policy anyway?

Now the shoe is on the other foot… isn’t it?

The insurer has made you an offer based on information it knows to be grossly insufficient for the underwriter to do their job.  You accept the offer in good faith.  Has the insurer got the right to void the policy?

Not in our view.

We think this story is far from over.  And we’d like to see a happier endingJ