Foundation Life Proposes $500 Million Payout to Policyholders
Foundation Life, a life insurance company owned by Australian investors, is planning to wind up its operations and return about $500 million to its policyholders. The company, which has been closed to new business since 2000, is offering policyholders two main options: cancelling their policies with a cash payout or transferring to a new policy with Chubb Life.
The proposal, backed by the company’s directors and an independent actuary, follows years of declining new business and pressure on returns due to low interest rates and a shrinking customer base. Chief executive Grant Piercy stated that the decision was made in response to policyholder feedback, as many have seen their insurance needs change over time.
“Most of our policies have been in existence for a long time and, following feedback, it was clear to us that many policyholders’ needs for life insurance had changed along with their financial circumstances,” Piercy explained.
Policyholders will have several options:
- Cashing out their policy with a minimum 5% increase above the surrender value
- Taking a replacement policy with Chubb Life, featuring at least a 5% increase in death benefit and no further premium payments
- A combination of both a new policy and cash payout
The Reserve Bank has approved the scheme, and policyholders will need to approve the proposal by majority vote at a special meeting on June 9. Foundation Life was acquired from Tower Insurance in 2014 and has been managing its existing portfolio since then.
The plan to wind up the business was first considered in 2018 but was delayed due to the complexity of the proposal and regulatory clearances from Inland Revenue and the Reserve Bank of New Zealand. Piercy emphasized that the proposal offers policyholders more value and flexibility in managing their life insurance coverage.
