The country's largest life insurer is planning to slash more than eight per cent from its premiums for new customers, just weeks after a tax overhaul lead to an industry-wide increase in the cost of life insurance.
The Government passed regulation last year that removed a tax exemption being received
by life insurers.
Sovereign said earlier this year that it planned to increase premiums for new policies by 15 per cent, but was now reversing some of the charge to minimise the impact of the change on new customers.
Existing policy holders are also covered by the reduction, Sovereign said.
The increase was lower than the 20 to 30 per cent estimated by the industry to cover some the estimated annual $75 million reductions in sector-wide profits.
The lowered premiums will apply to new and existing policy holders of Total Care products - which represented about 90 per cent of Sovereign's business, marketing and product general manager David Drillien said.
The percentage of those customers not covered by the changes was "miniscule" and were mainly direct products sold through partners, Drillien said.
Policy holders who have purchased life insurance from Sovereign since July 1, will receive a credit on their policy, while existing policy holders will receive a discount, if applicable, at their next policy anniversary date, from October 1.
Drillien said the company's position in the market meant it was better placed than most to absorb the changes.
"Our goal all along has been to minimise the impact of this long-overdue tax reform on our policyholders.
"Now that the industry has had a chance to adjust to the new tax regime, we've carefully considered our ability to absorb a greater share of the impact of the changes," Drillien said.
"We've made this decision after detailed analysis of the effects of the tax changes and of the feedback from our advisers."
- NZ HERALD ONLINE
