The insurer has said it received a slight increase in requests to include details of nominated beneficiaries on policies in recent weeks. 

That had prompted it to clarify its position.

Nominated beneficiaries are people identified as being intended to receive the proceeds of a policy.

This method is most commonly used to avoid having to set up multiple policies, to make a trust the recipient of an eventual pay-out, or to avoid insurance claim money being caught up in the administration of an estate.

A small number of insurers allow beneficiaries to be nominated on policies.

But Partners Life said a nominated beneficiary request could contradict insurance law and was vulnerable to being challenged in court.

"Not being able to provide clients with certainty about the legality of such a fundamental part of their contract is not appropriate in our opinion, so as a result our policy has been not to accept such requests," Partners Life said in an update to advisers.

“Unfortunately, commonly due to competitive pressuring by advisers, from time to time some of our staff have agreed to accept nominated beneficiary requests, despite our long-standing position.”

Managing director Naomi Ballantyne said because a number of companies did offer it as an option, some insurance advisers wanted Partners Life to, as well.

But she said advisers should not put themselves in a position where they were giving advice on something that did not have an absolutely certain outcome and could be legally challenged.

“The issue is when you die you are no longer the owner of your contract. Your wishes mean nothing. It’s for the new owner – the joint owner who is now the single owner or someone appointed by your estate to decide.”

She said only a will or a buy-sell agreement from a business could legally dictate where the money would go.

“Partners Life will not accept nominated beneficiary forms for individual policies, unless or until the policy ownership structure under the Life Insurance Act or other legislation is amended in a way that makes such a process legally valid,” the insurer said.

Adviser Jon-Paul Hale said he had been aware that was Partners’ position for some time.

He said he had only used a nominated beneficiary on three clients’ policies in the past eight years, to funnel the benefits of a policy to the trustees of a trust.