Changes for insurance

Press, 10 February 1986, Page 34

Changes for insurance

By

SIMON LOUISSON

in Wellington

Legal changes in the pipeline are likely to have a profound affect on the life insurance industry according to National Mutual chairman, Mr David Tudhope, in the company’s annual report.

The loss of tax deductability on new policies has already caused a change in selling patterns. Superannuation tax is under review and the possible loss of other tax incentives is currently being debated and resisted by the private sector.

At a media function hosted by the Life Officers’ Association, the chairman, Mr Boyd Klap, expressed the industry’s concern about the nonappearance of the Gov-

ernment’s Green Paper on the industry. The paper was due out over a year ago, and the industry is concerned about the uncertainty created by possible changes, particularly in taxation. A spokesman from the Minister of Finance’s office says the document has been held up because of the pressure of other work.

The tax changes, past and future, have not significantly affected National Mutual’s performance — the company’s assets grew from $l5OO million in October 1984 to over $2 billion a year later. “National Mutual’s significant increase in new business sales and market share, particularly in the superannuation sector over the past year, has therefore been all the

more remarkable,” says Mr Tudhope. The general manager, Mr D. C. Ashenden, says National Mutual is coping with the new market conditions better than its competitors. The company has increased its market share in all products as well as its over-all share of the financial assets of all life companies in New Zealand.

Sales increased 34 per cent, but Mr Ashenden ascribes part of the increase to widespread public anticipation of the removal of tax relief leading to a rush to gain “existing” policies. Strong sales performance has also come because of the expansion of products linked to the Consumer Price Index.

The report shows that a $lO,OOO policy in 1975 would have to be worth $35,600 today to retain its value.

National Mutual has introduced a range of indexation adjustments to its policies to meet the problem of inflation. Commenting on its investments, National Mutual believes the Government will hold its policy despite pressure for a more moderate approach.

“The laudable effoits of this Government to restructure the economy on to a path of long-term sustainable growth at low rates of inflation, cannot be achieved without a short-term decline in economic growth and a tight rein on liquidity.”