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18 October 2022

Insurance bill five times higher than projection

“They are misrepresenting themselves to their consumers and potential consumers.”

Jason and Lucy Danner bought a Partners Life Protection Plan via a broker in 2017. The policy included life and trauma cover, household expenses cover and private medical cover.

At the time, Partners Life projected premiums would go up on average 3% per year from the second year of the policy, based on inflation.

Yet when Jason crunched the numbers, he discovered that since 2017, the premium has jumped nearly 80% in five years, instead of the predicted 15%.

Year-on-year premium increases have been between 8% and 20%.

“Their projections were basically somewhere around 3% a year … we didn’t experience anything less than 8%,” Jason said. “In two years, we experienced increases that were over 15% – it’s mind-boggling.”

The couple had a baby and added him to the medical portion of the policy in 2022. Jason expected the policy projections issued in the revised policy would reflect what they had experienced – between 8% and 18% – yet he said the projections were still around 2.7% to 3%.

He considers the projected premium price increases to be misleading.

“They are misrepresenting themselves to their consumers and potential consumers, by making them think that these policies are going to be a lot more affordable than they are,” Jason said.

Partners Life includes a disclaimer that while they “make their best endeavour to ensure accuracy”, the premium projections are illustrative only and actual increases may vary.

Yet Jason believes Partners Life didn’t make any “endeavour at all, much less their ‘best’ one”, given the difference between the projections and the actual premium increases his family experienced.

A spokesperson for Partners Life said premium prices are adjusted annually for age, as well as actual Consumer Price Index (CPI) increases, which reflect inflation. It also applies a loyalty discount of 1% each year up to 10% from the third year of the policy.

Premium rates also increase when the insurer receives more claims from customers than it expects, it said.

Unfortunately for the Danners, this happened over four years because of increased claims from other clients for the same policies they hold, the spokesperson said.

We asked the Financial Markets Authority (FMA) whether such a mismatch between premium projections and actual premium price rises are misleading.

While the FMA doesn’t comment on individual cases, a spokesperson said it expects insurers to “ensure premium inflation forecasts are not misleading, and they regularly review these to ensure that the factors that may influence future premium increase – including inflation – are given due consideration.”

In August this year, Partners Life announced it was being sold to global life insurance company Dai-ichi Life Holdings for around $1 billion, subject to regulatory approvals. In the past financial year, Partners Life collected $427.9 million in annual premiums.

While the projections gave Jason an impression the policy would be affordable over the long term, he’s now considering how much longer he can afford the insurance.

“I feel like there are a lot of people who, you know, are probably ending up with policies that are unaffordable.”

A spokesperson for Partners Life said its policies are not sold direct to customers but via financial advisers. If a client’s financial situation changes, or affordability is an issue, it encourages its clients to review cover with their financial adviser.

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