{"id":82330,"date":"2026-05-12T16:47:50","date_gmt":"2026-05-12T06:47:50","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=82330"},"modified":"2026-05-12T16:50:59","modified_gmt":"2026-05-12T06:50:59","slug":"keeping-the-promise-of-life-insurance","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2026\/05\/12\/keeping-the-promise-of-life-insurance\/","title":{"rendered":"Keeping the Promise of Life Insurance"},"content":{"rendered":"
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Long-time senior industry advocate, Don Trapnell, has released an open letter in which he argues the recent creation by one insurer of a new risk cover class for life insurance policies opens the door to a precedent that he says should worry anyone relying on life insurance to deliver on its promise\u2026<\/i><\/h2>\n<\/div>\n<\/div>\n

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If you missed it, Zurich has created a new \u2018death cover class\u2019. This new class includes policies where a third party has a legal or beneficial interest, such as co-ownership arrangements involving a financial services business. Those policies will face what Zurich calls a \u2018substantial\u2019 premium increase \u2013 up to 400%.<\/p>\n

In other words, the insurer is re-categorising a group of policyholders based on how their premiums are paid and who ultimately benefits from the policy.<\/p>\n

It raises a fundamental question: How is it acceptable for an insurer to re-categorise any particular group of its own policyholders for any reason<\/i> and effectively change the deal after the fact?<\/p>\n

This creates a situation where, as long as you can prove you can afford to pay the premiums yourself, everything remains the same, but where a third party is involved and has a financial interest, the premium may substantially increase.\u00a0Once that door is open, where will it stop?<\/p>\n

What if another insurer decides to create a new risk class to include policyholders who assign their policies to family members? What if a son or daughter helping to pay premiums is suddenly required to pay four times the premium because they have a beneficial interest in the policy?<\/p>\n

What if it goes even further? What if it extends to people living in certain suburbs of Melbourne or Sydney or Brisbane based on perceived claims experiences?<\/p>\n

A new death cover class sets a precedent that has the capacity to erode consumer trust \u2013 in insurers, in the industry, and in life insurance itself. \u00a0<\/span><\/p>\n

It also places advisers in a very difficult position, having recommended policies under one set of terms that can be substantially altered by the product manufacturer later.\u00a0<\/span><\/p>\n

This affects service providers such as iExtend. That\u2019s significant. iExtend offers a structure designed to help people manage rising premiums. It contributes to the cost in return for a share of the death benefit. It\u2019s worth remembering that iExtend earns nothing unless a claim is paid, sometimes many years later.<\/p>\n

I have personal experience with this structure myself, as did one of my clients.<\/p>\n

Graham* rang me one day to say he wanted to cancel his life insurance, the premiums were eating up too much of his income. My response was simple: \u201cGraham, with your health history, that would not be a very smart thing to do.\u201d He had already had a heart attack and triple bypass surgery.<\/p>\n

Financial pressure<\/strong><\/p>\n

But he was under real financial pressure and looking to cut his expenses. Instead of arguing with him, I went searching for a way to help him keep the cover in place without breaking his budget. Then I sent him an email setting out how the iExtend structure worked.\u00a0<\/span><\/p>\n

Graham came back to me saying: \u201cIf someone else believes this policy is valuable enough to pay towards, perhaps I should treat it as valuable too.\u201d<\/p>\n

About 18 months later, Graham went in for what was meant to be routine surgery. During the operation he developed a blood clot and never came off the table.<\/p>\n

When his wife came to see us, she was not only grieving, she was shocked. She had discovered that the beautiful home they had been living in and the nice car they drove were leased, not owned. In fact, the only meaningful asset left to her was the life insurance policy.<\/p>\n

Because of the way we\u2019d structured the policy, 50% was owned by Graham and 50% by iExtend. She received 100% of Graham\u2019s 50% and because Graham had died within four years of putting the arrangement in place, a significant portion of the remaining 50%.\u00a0<\/span><\/p>\n

These benefits enabled her to buy a small home of her own and set aside some savings so she could live with dignity for the rest of her life, rather than relying entirely on her children and Government support.<\/p>\n

Had that insurance not been in place, had iExtend not existed as an option, she would have been left in a truly precarious position. Instead, the policy did exactly what life insurance is meant to do: protected an ordinary Australian in her most vulnerable moment.<\/p>\n

Life Insurance Act<\/strong><\/p>\n

Insurers have some powers under the Life Insurance Act to adjust product terms across their books in certain circumstances. What\u2019s at issue here is something that arguably goes beyond that. An insurer appears to have applied different terms to a very specific group of policyholders retrospectively.<\/p>\n

If an insurer wants to change its appetite or product design going forward, that\u2019s their prerogative. Update the policy wording for new business. Make the terms clear. Don\u2019t reach back into an existing pool of long\u2011standing policies and change how they operate for a targeted group of policyholders.<\/p>\n

Life insurance must be allowed to keep its promise. At its best, it does something profoundly simple and profoundly important: it catches people when the worst happens. Graham\u2019s widow living modestly but securely, is evidence of that.<\/p>\n

If insurers are allowed to substantially rewrite the deal for specific groups of people after years of premiums have been paid, it will erode the very foundation that makes these products work: the belief that, when you most need your policy to stand up, it will.<\/p>\n

*Name changed to protect privacy.<\/em><\/p>\n

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\"\"Don Trapnell is a former Chairman of Synchron Advice.<\/i><\/p>\n<\/div>\n

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 <\/p>\nBack to Adviser Focus Main Page…\u00a0<\/a>\n\n","protected":false},"excerpt":{"rendered":"

Long-time senior industry advocate, Don Trapnell, has released an open letter in which he argues the recent creation by one insurer of a new risk cover class for life insurance policies opens the door to a precedent that he says should worry anyone relying on life insurance to deliver on its promise\u2026<\/p>\n","protected":false},"author":23,"featured_media":82356,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6868,4587,3,8271,4],"tags":[],"class_list":["post-82330","post","type-post","status-publish","format-standard","has-post-thumbnail","category-adviserfocus","category-estate-planning","category-general","category-pricing","category-products"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/82330","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=82330"}],"version-history":[{"count":4,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/82330\/revisions"}],"predecessor-version":[{"id":82372,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/82330\/revisions\/82372"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/82356"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=82330"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=82330"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=82330"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}