At a recent conference, Partners Life chief marketing officer Kris Ballantyne gave advisers an overview of their new products - Income and Expenses Cover and Moderate Trauma Cover.

He told attendees that insurers "...need to be sensitive toward pricing and affordability for customers as prices go up".

"The truth about income cover is that the claims experience is declining fast for a number of reasons and has been for some time.

"Some of these reasons are self-inflicted wounds from insurers like ourselves...for example, mortgage repayment cover not offsetting ACC allowable income.

"This makes no sense objectively, but it's a good competitive edge. So it happened and everyone followed [and] that's a position we've created as an industry."

Ballantyne says in Australia the issue has become so bad that industry regulators have stepped in and started to mandate "...what products can look like, what products can be and how products are going to work".

"It is one of the worst product designs I have ever seen in my life, it actually offends me as a product person.

"In New Zealand, we can't let that happen, we can't get to the stage where the FMA or Reserve Bank are stepping in and starting to tell us what to do because we have let the problem get so bad."

Ballantyne says some companies are taking steps to fix the problems with income cover such as better underwriting and raising prices to maintain profitability.

"The better long term solution is that we as an industry define how we are going to fix it rather than it being dictated to us."

Partners Life's response is the introduction of Income and Expenses Cover that Wright described as a disability income-style product with the key difference being it's about 25% cheaper than similar products already in the market.

"It also has an ability to account for household expenses as a loss of earnings paid position.

"But the definition of DI will change after one year to a reasonable occupation definition - by way of suitable experience and training - you get 80% of that same income.

"That's a way we protect against those long-lasting claims that start as one thing and transform into another.

He says the new product is an option for both new business and existing business as a retention strategy.

The second product launched is Moderate Trauma Cover, which sits between standard trauma cover and severe trauma cover.

"Trauma is going to keep getting more expensive, severe trauma has stayed more or less the same, but the gap between the definitions is widening."

Ballantyne used the example of the definition of cancer in trauma claims.

"It looks like the cancer definition on trauma requires malignancy, it requires spread - it doesn't.

"We are paying full trauma claims of hundreds of thousands, or in some cases millions of dollars, on stage zero cancers which are asymptomatic and shouldn't even be treated from a medical prognosis point of view.

"That is crazy and is only going to lead to more and more claims dollars being paid out and that price going up and up in the future."

Ballantyne says the severe trauma definition sits at stage four and stage three cancer where treatment is likely to fail.

"Where moderate trauma cover sits at stage two, at the point where it has spread, and does show malignancy and requires some form of treatment."

He says the Partners Life product will be about 20% cheaper than trauma cover offered today.