Zurich Product Update April 2008

Zurich Australia has launched a series of initiatives in releasing its updated Zurich Wealth Protection PDS (Issue date: 1 April 2008).

The company has introduced a broad array of initiatives, highlighted by:

• The launch of Select Term – a limited duration term policy, with level premiums for terms of 5, 10 or 15 years – with rates guaranteed for the first five years
• The introduction of Loyalty Discounts – rewarding insured lives who take out more than one policy, or related lives in a family or business situation – discounts of up to 15% are available
• Expanded partial trauma benefits – with a new option to increase partial trauma benefits to up to 25% of the trauma sum insured
• A new option for Income Replacement – Basic Cover option – to help reduce premiums for cost conscious clients

 Details of these initiatives and other product enhancements are set out below:

Zurich Select Term

 As summarised above, Zurich Select Term is a new limited duration term insurance contract that will pay a benefit in the event of death, TPD or terminal illness.

Over recent years there has been a trend developing where the life companies have offered limited duration contract alternatives to clients to avoid substantial loadings or having their insurance proposals rejected.

Until now, these limited duration contract options have been offered within the standard term insurance product.  But Zurich has now taken this concept a step further by releasing a separate and distinct product, allowing more flexibility for the adviser to offer his/her client over different periods of their lives.

Zurich Select Term offers 5, 10 or 15 year terms.  It remains a ‘fully featured’ product and offers an increasing cover option (flat 5%).

Premiums are structured on a ‘level premium’ basis only, but importantly, Zurich has applied a five-year premium guarantee, which it sees as “…unique in the Australian market.”

The underlying purpose of any limited duration product is to be able to offer the insured cover at a time in their life when they need it most.  Zurich highlights these areas in its press release when it refers to this product as being suited to:

• Protecting a mortgage
• Covering higher expenses for limited periods, such as education expenses
• Matching the needs of business owners in the event of premature death

Also from Zurich’s press release:

Andrew McKee, Head of Life Risk at Zurich, said, “In Australia’s current economic climate, millions of households and businesses are suffering sleeplessness, worrying about their mortgage burden or business profitability, because they know they are at financial risk with their high level of debt.

“By customising life insurance by the length of term, Australians now have the flexibility to design an insurance solution that meets their changing needs – backed by the certainty of premiums that are guaranteed for the first five years,” he said.

Select Term recognises that an individual’s need for cover often changes over time with their changing stage of life – children grow up, business arrangements change, mortgages are paid off.  Many of these events can be predicted.  The range of life insurance offerings currently available in the market haven’t allowed advisers to tailor an insurance portfolio to cater for the changing needs of their clients.  Select Term offers advisers the flexibility and choice to tailor insurance programs that are specifically designed for their client’s individual circumstances.

In terms of premium costs, Zurich presents a set of examples that show the client would generally pay less premiums over the selected term period compared with a stepped premium basis.

The product will be available as ordinary or superannuation business, either direct from advisers or through Zurich’s online Ezicover range, available via intermediary websites.

Introduction of Loyalty Discounts

Loyalty discounts are now available for Wealth Protection products, provided a new policy is taken on or after 1 April 2008.  The nature of the discount relates to:

• Multi Policy Discounts
• Family Discounts
• Business Discounts

For multiple policies, there is a discount of 5% for each policy.  For related lives in a family structure or for business relationships, the discount will range between 2% and 10% depending on the number of insured lives in the group.

Other initiatives/enhancements by product include:

Zurich Protection Plus

• Premium waiver option enhanced firstly by reducing Total Disability qualifying period to three months (previously six months) and also by allowing a refund of premiums paid during the now three month waiting period (previously premiums paid during the six month waiting period were not refunded).  This also applies under the Superannuation Term Life Insurance Plus product.
• Trauma cover entry age is now age 19 next birthday (previously 20 next birthday); also allowing more simplified underwriting from a Child Cover trauma option into a stand alone trauma contract.
• Additional events covered under Partial Trauma cover: Diabetes (Type 1), Colostomy or Ileostomy, Severe Rheumatoid Arthritis, Single Loss of Limb or Eye, Loss of Hearing in One Ear
• Introduction of a new Partial Trauma top-up option.  This option will allow a payment of 25% of the insured benefit on all Partial Trauma events up to $100,000 ($max $50,000 on Angioplasty).  The standard Partial Trauma benefit pays 10% up to $25,000.
• Enhanced, more ‘generous’ trauma definitions for: 
  •             Benign Brain Tumour
  •             Deafness
  •             Loss of Speech
  •             Major Organ Transplant
  •             Multiple Sclerosis
  •             Muscular Dystrophy
  •             Severe Burns
•  Enhanced Child Cover option, where cover is now available for 25% of the Extended Trauma benefit, up to $200,000 (previous maximum was $50,000).
•  A funeral benefit has also been added to the Child Cover option, which pays $5,000 on the death of a child.
•  TPD cover can now exceed Death cover under Zurich Superannuation Term Life (limited at outset to two times the death cover), intended to provide greater flexibility within the product.

 Income Replacement and Business Expenses Insurance

• The main income protection initiative in this launch is the introduction of a new Basic Cover option.  For a 10% discount, the client may elect to take income protection cover with: Restricted Income Benefit criteria, No Confined to Bed benefit, No Special Care benefit
• Improved Recurrent Disability clause, where Zurich will use the original start date of the claim when it assesses the Waiting Period, excluding any periods where the life insured has returned to work (previously it was possible for a two year wait to begin again if the life insured had returned to work at any time during the two year benefit period under an employer policy).
• Removal of the termination on unemployment clause under Business Expenses, along with removal of restriction on eligible business expenses paid to family members.
• Introduction of Day Four Accident option under Business Expenses

 Premium Rates and Charges

• Zurich advises it has changed underlying premium rates across the board for all product types.  These changes represent both increases and decreases and are all generally within a quantum of 2% to 4%.
• New policy ‘Management’ fees have been applied, following the CPI.

Zurich’s overall emphasis in this update, from both a product and marketing point of view has been to submit to advisers an update that offers “the right solutions” to match the differing needs of different clients.