How insurers price risk

An insurance premium is an estimate of what your cover will cost the insurer, plus expenses, plus a margin, plus a buffer for being wrong. The estimate is built from tables. For life cover, the base is a mortality table — the expected probability of death at each age, split by sex and smoking status, refined with the insurer’s own claims experience and its reinsurer’s data.

For cover that pays while you are alive — trauma, TPD, income protection — the base is a morbidity table: the expected rate of a listed diagnosis, of permanent disablement, or of a disability claim lasting longer than a waiting period. Morbidity is a harder thing to predict than mortality. Medical practice changes, definitions of conditions change, and claim behaviour responds to the economy. That is why prices for those products vary more between insurers than life prices do, and why they are repriced more often.

Layered on top is everything specific to you: your occupation, your build, your health history, your family history, your pastimes and where you live and travel. Each of those either shifts you between rate tables or produces a loading.

Base mortality and morbidity

The expected claim cost for someone of your age, sex and smoking status. Smoking status is the single largest binary lever in the whole calculation, which is why insurers test for cotinine and why definitions of non-smoker — how long clear, whether vaping counts, whether nicotine pouches count — differ and matter.

Reinsurance

No New Zealand insurer carries all of its own risk. Reinsurers take a share, and in exchange they influence the underwriting manual, the rating for particular conditions, and the maximum sums insured an insurer will write without referral. Two insurers with different reinsurance treaties will genuinely assess the same medical history differently — this is the mechanical reason underwriting appetite varies across the market, and it is why one decline is not the market’s answer.

Occupation

Occupation classes group jobs by physical risk and by how easily someone in that job can return to work in a modified capacity. Class affects income protection and TPD pricing most, and it also determines which disability definitions you can access — own occupation cover is not offered to every class. Insurers classify the same job differently, which is a common and unnoticed source of price difference.

Individual underwriting

Your disclosure is assessed against the insurer’s underwriting manual, which converts a history into a rating. Health loadings are usually expressed as a percentage added to the standard premium, or occasionally as a flat extra per thousand of cover. The alternative outcomes are an exclusion, a deferral or a decline.

Expenses, margin and repricing

On top of the claim cost sit the insurer’s acquisition costs, administration, commission and profit margin, together with the capital it must hold under prudential supervision. This is why cheaper distribution does not translate into cheaper premiums the way people expect — commission is built into the rate table whether or not an adviser is involved.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Smoking definitions vary. Some insurers require twelve months clear, others longer, and treatment of vaping differs.
• Build charts differ, so the same height and weight can produce a loading at one insurer and not another.
• Family history is weighted differently, particularly for cancer and cardiac conditions before a certain age.
• Occupation classification is not standard, so ask how your job has been classed and challenge it if it is wrong.
• Loadings can sometimes be reviewed later if the underlying reason has improved. Most people never ask.
• Insurers reprice classes of policies over time, which is a separate thing from your premium rising with age.

Every New Zealand insurer writes the complete guide to life insurance in nz to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Advisers see how different insurers rate the same disclosure, which is the whole reason shopping a risk works.
• They can present a history well — a covering note with current readings often changes an outcome.
• They can ask for a loading to be reviewed after a condition stabilises, which insurers rarely volunteer.
• They know which insurers classify a given occupation favourably, which can move income protection pricing significantly.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.