Why life insurers oppose the government’s proposed NZIIS

In response to a consultation paper released mid-year by MBIE, insurers say they’re also opposed to the government’s attempt to bundle a form of redundancy cover into the scheme offering disability insurance. In their view, redundancy and disability cover are very different and redundancy must be uncoupled from the plan.

Several insurers are questioning the speed at which the government is trying to fast-track the legislation and implementation of NZIIS. And they say no consideration appears to have been given to the scheme’s effect on customers who already pay for private income protection insurance or employers who offer this cover as part of employees’ remuneration packages.

Because the scheme doesn’t offer opt-out provisions for those with private cover, Partners Life and Cigna say they fear customers will be tempted to cancel their current policies if forced to join the government’s scheme as they (wrongly) perceive the products to be similar.

Partners Life managing director Naomi Ballantyne says her firm’s view is that redundancy is not an insurance event. Redundancy - or, as Partners Life puts it, “displacement” - is a matter of employer choice and the government’s proposal will likely increase the risk of “fraudulent collusion” between employers and employees at the expense of the scheme and its contributors.