AIOFP boss recommends Zurich boycott
The Association of Independently Owned Financial Professionals (AIOFP) is recommending to members that they boycott the use of products from major insurer, Zurich, until a dispute over the reclassification of some policy terms is resolved.
AIOFP executive director, Peter Johnston has written to members of his organisation recommending the boycott citing “poor behaviour by Zurich Life”.
In doing so, he claimed that Zurich had “decided to retrospectively [and without notice or consultation] increase the premium 4 times on Life Policies I-Extend” and suggested this has been occurred “with the obvious intention of destroying the policy”.
While recommending the boycott, the AIOFP acknowledged that the precise legal basis for Zurich’s actions remained to be fully established but claimed that on the available evidence the company’s position is problematic.
For its part, Zurich explained its position with a spokesperson stating, “Policies in this new risk class represent a higher risk than the broader portfolio due to the altered policy ownership and funding structure, as well as the higher average mortality rate for these policyholders”.
“This change has been introduced to support the long-term sustainability of Zurich’s portfolio by reflecting the increased risk associated with these policies,” the spokesperson said.
The position adopted by the insurer applies to any third party model and it is understood that Zurich has provided the option of clients reverting to being the customer and therefore avoiding the changes.
In a more detailed explanation, Johnston’s message to members state: “It has come to the AIOFP’s attention that Zurich/Onepath Australia Limited has taken steps that appear to involve the retrospective reclassification of in-force term life insurance policyholders, by creating what has been characterised as a ‘Death Cover Class’ with a higher-risk premium category”.
The explanation claimed “the policyholders affected are those whose policies are co-owned through an arrangement involving iExtend, a licensed, adviser-referred, fully disclosed premium continuation product.
“iExtend enables policyholders who can no longer independently sustain their life insurance premiums, due to health deterioration and often financial pressure that frequently accompanies it to maintain their existing cover through a structured co-ownership arrangement with Perpetual Nominees acting as custodian trustee.
“These policyholders entered into their original insurance contracts in good faith. They maintained their premiums in good faith. They sought professional advice and engaged a licensed product to protect cover they had built over years. The arrangement is lawful. The advice and adviser relationship was appropriate. The insurer accepted the premium without objection,” the AIOFP document said.
“When an insurer retrospectively alters how an existing policy is treated, after advice has been given, after risk has been accepted and after premiums have been paid strikes at the foundation of trust. Not only trust in advisers, but trust in the insurance system itself. Consumers affected by these decisions are not abstract policy numbers. They are people who followed the rules. They sought advice,” it said.
It went on to state: “This issue cannot be dismissed as a commercial disagreement between businesses. It is a consumer issue; a professional standards issue and a systemic risk issue.
“And the systemic risk is this: if retrospective reclassification becomes normalised, if product providers can selectively reinterpret commitments already made then guaranteed renewability becomes conditional, not guaranteed. Once that line is crossed, every Australian with a long-term insurance policy is exposed. Not just iExtend clients. Every policyholder who believes the promise in their contract means what it says.”
Given the 100% plus increases in Life Ins premiums post LIF, of course Life Ins companies can’t be trusted, not sure they ever could have been.
IExtend is a smart actuary analysis option / product to make wins against Life Ins CO’s.
Life Ins CO’s never like it for others to win at their expense, so they have out smarted IExtend with their own actuary analysis / policy re-rates.
Just another mess, to the terrible mess of Australian Life Ins.
Not wanting to excuse this particular instance, but no-one ever makes “wins” against an insurer. The insurer is not a money pit. Insurers just balance out premiums and claims, taking a fee for their service along the way. A “win” by one group of clients can only come at the expense of a “loss” by another client group.
The whole reason IP and TPD are failing products is the huge number of “wins” for anyone lodging a mental health claim, no matter how spurious or unverifiable, which have been funded by massive premium increases for all other policy holders. The mental health lobby will of course claim this as a “win”, but it is ultimately a “loss” of affordable disability insurance for people who might suffer from any other sort of disablement.
Zurich would have to be the most prolific of the price gougers, for a once good company they are bottom feeders now, can’t trust them based on my claim’s experiences too.
Once good – correct. Now? You have to wonder.
Zurich talks a big game about claims, but according to the latest on MoneySmart – is worse than the industry average for claims disputes (adviser business) for – Death, and for TPD, and for Trauma and for Income Protection. Not sure trust is a priority at the moment.
We are now seeing cohorts of policyholders being singled out, not because of broad claims deterioration across an entire product, but due to specific policy ownership structures.
That is a very different proposition.
This is no longer about spreading risk across a wide pool. It is about identifying segments of a book and materially increasing premiums on those segments in some cases by 30 to 40% per year to correct profitability.
Technically, insurers may argue this sits within policy terms.
But let’s be clear: this is not broad-based repricing.
This is targeted. And that distinction matters.
We already operate in an environment where advisers are held to high standards of accountability including bearing the cost of failures through mechanisms like the Compensation Scheme of Last Resort.It is reasonable to ask: Where is the equivalent constraint on insurers?
If targeted repricing and excessive year-on-year increases are allowed to continue unchecked, the long-term consequence is clear:
Clients will lose trust in the system. And once that happens, the entire foundation of life insurance which relies on long-term participation begins to erode.
There needs to be a line.