There’s a lot going on in the life insurance industry around price increases, brought on by a change in tax legislation. Pinnacle Life made several comments (see Good Returns and Stuff) about insurers unjustifiably raising premiums for their existing policyholders and we’ll stand by that.
The nub of the issue is that we have new tax legislation in NZ specifically for life insurance companies, as mentioned in a previous post. The new legislation effectively increases company tax on life insurance policies sold after 1 July 2010.
But what about policyholders that already have a life insurance policy today? Is there an increase in company tax for these policies?
The simple answer is “no”. The new tax legislation protects existing policyholders by effectively waiving increased tax on these policies for a period of 5 years. For what it’s worth, the concept has been termed ‘grandfathering’.
So why are some insurers increasing premiums for their existing life insurance customers? After all, there’s no added cost related to these policies so we’ve questioned the logic.
And who's standing up for these existing customers?
We also wonder what the IRD will make of all this given their extraordinary effort to avoid this happening.