Ok, we admit we’ve been rather quiet on this Blog lately.

There’s a lot to catch up on, starting with the fact that Pinnacle Life is now advertising on TV.

If you’re a regular TV watcher, you’ll see the PINNACLE LIFE ads on TV3, Prime and some of the SKY channels.

Here’s the first of three ads, right off YouTube… click here to view

Feel free to let us know what you think…?

We all know Christmas can be a stressful time. Family obligations, financial pressures and excess consumption all lend themselves to an insurance claim. We thought we’d give you some insightful hints on how to deal with all this Santa stress.

Ms Clause

A happy Ms Clause makes for a stressfree Santa. Hints… don’t mention the word dry and turkey in the same sentence, do the dishes before you’re asked, don’t make her play cricket, and when she does:- don’t laugh at her inability to catch, bat or understand the purpose of the game. If this is all done right… it may even lead to a little Ho Ho Ho (keeping her wine glass full helps)

Chimney squats

So you’ve been squatting in front of the chimney for the last 12 hours trying to assemble the latest toy for the little elf. Your Chinese is much improved, but clearly not good enough to read a set of instructions. Your thigh muscles are burning, the vital piece seems to be missing, your fore-arm is aching with screw-driver overuse and now Ms Clause is now offering her advice (a bottle of wine will help interpret the Chinese)

In-law sprints

Just the thought of the in-laws gives you angina, and they’re always the first to arrive. So get your head down and sprint in the opposite direction. The longer the sprint, the better the chance of getting your heart rate up and lowering your stress levels. Be thankful for the food, the company and the fact that you only have to see them once a year. (To help, scull a glass of wine as their car enters the driveway)

Managing elves

For once, give them what they asked for… not what’s good for them. Educational toys suck. Make sure you have the batteries and earplugs (also helpful for in-law chatter). Sharing is NOT caring. (a full wine glass also helps your 5am start )

Christmas Carrols don’t rock

It all starts in November with the first Christmas advert.. then the cacophony of endless carols heard at prize-giving, retail shopping, radio stations, TV adverts, banner-ads and soon you’re dreaming for silent nights. Jingle bells don’t rock and Reindeers don’t have red noses or fly. (You need more than a glass of wine for George Michael’s last Christmas)

So if you don’t need the Santa stress, and to keep our claims down, stay at home and buy online.

Following up on Steve’s post a few days ago regarding high commissions, thought a quick comparison of life insurance premiums across the NZ market would indicate just how much more efficient it is to buy your life insurance online.

Take a look at this simple comparison table for two 40-year-olds buying $300,000 life insurance cover…

 (All prices have been sourced from quotes on NZ website available to the public)

On average you can save over 20% if you buy on-line… go figure J

In June last year insurance commissions were in the news and we wrote this story on our blog. This month, commissions are in the news again. See this article posted yesterday on Good Returns.

We don’t really want to get into the debate all over again (yes, really…) but we think it is important for NZ consumers to be aware of what is going on in their life insurance industry.

In the story we are referring to, insurance companies are now paying commissions of 230% to get brokers to sell their products. Of course, these brokers are absolutely independent and are entitled to sell any insurance products they wish.

Now if you were a broker I’m sure you’d be happy to offer the product for which you’re paid say 150% commission rather than the product paying 230%. You’d always choose the product that’s best for the consumer. It makes perfect sense… wink, wink.

Anyway, as long as NZ consumers realise that buying through a broker chews up the equivalent of the first 2 years and 3 months of your premiums, plus a little more each year thereafter for the life of your policy, then that’s ok.

But it’s also worth knowing that this is one of the key reasons it’s around 20% cheaper to buy life insurance online.  

So, if you know how much life insurance you want, why not go online and save yourself a bundle?    

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.

In July 2008 Pinnacle Life launched a policy called ‘Funeral Cover’.

Whilst the product is designed essentially for people over 50 (and many insurers call it ’50 Plus Insurance’) it’s available online to anyone aged 30 to 69.

What surprised us is the proportion of people in their 30’s and 40’s that have purchased Funeral Cover - clearly the product’s hitting the mark with Generation C… so to speak!

How does it work?

The entire application process takes around 5 minutes… after which you’ll have a policy covering your funeral for $5k, $10k, $15k or $20k. And the premiums offered for these cover amounts and for this type of product are the lowest in NZ. 

Best of all, being a ‘guaranteed issue’ product, Funeral Cover is offered with no health questions asked, and the policy is emailed to you immediately online.

And not only do the premiums stay the same every year, but once you turn 85, you totally stop paying – and your cover continues free of charge until you, ahem, expire.

And the extra bonus?

Your family will say great things about you at your funeral. See these ads from YouTube…

http://www.youtube.com/watch?v=V4FHeVWjGrc

http://www.youtube.com/watch?v=Nw0s4C0g5SM

 (It’s ironic that this latter video was the last advertisement directed by a popular Malaysian movie director, Yasmin Ahmad, who died soon afterwards of a stroke aged just 51…)

We recently presented the Pinnacle Life online solution to a large New Zealand corporate that was looking at alternatives to their current group life scheme they have in place.

The question was asked if there were any tax advantages to be gained by the company or the employees with a different form or category of contribution. We provided the following summation in response to the question posed:

Life Insurance contributions by a company are liable for FBT when;

·         an insurance policy where an employer takes it out for an employee and pays the premiums

·         an insurance policy of a life insurance agent or their family, where there is a discounted premium.

Life Insurance contributions by a company are not liable for FBT when

·          an insurance policy where an employee or family member takes it out and the employer pays the premiums – in this case, the payments are taxable income in the hands of the employee.

·         an insurance policy where an employer takes it out for an employee, pays the premiums and gains the benefit from the policy (the company or employer is the beneficiary of the product). In this case, the payments are not subject to fringe benefit tax, and are not taxable in the hands of the employee

In simple words, a group scheme policy where the company pays the premiums and the employee gets the pay-out in the event of death is taxed as an employee fringe benefit rate. 

In the event that an employee takes out a policy, and the employer then pays the premiums, payments are not subject to FBT, but the premium payment is treated as taxable income for the employee.

Where the company pays the premium, and is the beneficiary of the policy (often is the case for key man insurance) payments are not subject to FBT and are not taxable.

 Source:    

http://www.ird.govt.nz/fbt/categories/employer-contributions/fbt-fundsinsurancesuper-liableinsurance.html

Pinnacle life now partners with Diners Club – see Diners Club website for more details.

So what does this mean for Kiwi’s that buy life insurance from Pinnacle Life with their Diners Club Card?

• Firstly, you’ll get a discount off the Pinnacle Life retail online prices, reducing your payments by up to 20% lower than the market average.
• Secondly, you’ll receive an additional $10,000 accidental death cover free of charge for any Life Cover or Mortgage Cover policy purchased as a Diners Card member.

Check out their website to see the range of benefits and services offered to cardholders… including online life insurance… of course!

Consumer.org.nz has just updated their price comparisons for life insurance and we’re pleased to say that Pinnacle Life looks very sharp… as if we doubted it! 

In brief;

• Out of 21 quotes for an individual life insurance policy, Pinnacle Life was far and away the lowest price.  
• The closest bank was 18.4% more expensive than Pinnacle Life for the same cover.
• The most expensive quote was from one of the largest life insurance companies at 59.1% more expensive than Pinnacle Life, also for the same cover!

We recommend that you take a look at the consumer coverage and if you’re not a member, we suggest you take up membership so you can access all the relevant information on their excellent website www.consumer.org.nz.

They suggest you should ‘shop around’ for life insurance because of the variation in prices. We agree!!