Insurers are concerned about the volume of unneeded treatments. This report highlights unneeded surgery. You may wonder why there would ever be unneeded surgery - and yet these examples from Australia are quite shocking. Significant and dangerous surgeries are being performed with no evidence of effectiveness. A reminder that every profession is subject to pressures: sometimes by desperate clients who want to try something, anything, to help. Perhaps at other times by the pressures of the conflicts of interest inherent in recommending a surgery. Link.
Hank Stern of Insureblog tells this story about an insurer making a mistake at claim time. Exactly the kind of mistake you imagine insurers making. Fortunately it does work out in the end - but worth a read - link. It underlines again the usefulness of a full service adviser in assisting with the claim process.
This new report from UBS highlights financial advice issues for what it coyly describes as 'modern' families. We might call them blended, or non-traditional families. Whatever the form of words this is what we group in this category:
- Blended family: family with children from a prior marriage
- Same-sex couple: with or without children
- Multigenerational family: aging parent or adult child in the home
- Older first-time parents
- Single-parent family
- Unmarried couples with children
These now make up a large proportion of families as a whole. You may say that single-parent families are more common in low-income/low-asset households with less need of financial advice, but UBS tell us that in the United States these non-traditional families make up 34% of households even among the wealthy. In New Zealand these trends may not be as advanced, but a review of my contacts list with this in mind turned up plenty of non-traditional families among my colleagues, friends, and neighbours.
The implications for financial planning as a whole are interesting. Although UBS were not writing to specifically address insurance concerns it is not hard to identify policy ownership, estate planning, wills, trusts, and enduring powers of attorney as key issues. Unfortunately the number of financial advisers specialising in connecting insurance to these legal services effectively has always been low and based on my recent observations remains low.
But the rewards to advisers that can offer good services to these families are likely to be great. Families in this group are more worried about their financial planning and are less likely to have addressed it - partly because most financial planning is geared to traditional family types.
The report is well worth a read in full. Find it at this link.
Thank you to all the advisers we saw in Auckland, Hamilton, Tauranga, New Plymouth, Palmerston North and Napier over the last month. A few follow-up points:
- Thank you for coming - we have had record attendance at every venue so far.
- We are conscious that some advisers have not used research extensively - if you haven't please check out the instructions on the site and videos you can find at this link.
- If you are looking for us on LinkedIn to get regular product and pricing updates on your smartphone then you need to search for Quality Product Research - or go to this link.
If we haven't seen you at a workshop yet, then we look forward to seeing you in Wellington, Christchurch, Auckland (again) Invercargill and Dunedin over the coming weeks.
Asteron Life's new income protection product, Workability, is designed to make income protection more affordable, and focus on assisting the client on a return to work.
We have rated the product, but some rating issues remain and will probably be improved after discussions with Asteron Life that are ongoing. We will detail those areas here so that you can clearly identify the issues and use the current rating appropriately.
The launch of the product has challenged us to look at the weighting given to some items within the income protection rating model and we will start discussions with all income protection insurers in order to try and bring more data to the decision around the right weighting for those items.
From a pricing perspective Workability will usually be the lowest cost option in any basket of product you select on Quotemonster, by a margin of 10% to 12% below the next lowest, 30% lower than the most expensive in a reasonable comparison set. You can create a comparison with products that are even more expensive.
From a summary rating perspective the product scores 58.54 points in a field where the scores are typically between the low 60s and high 90s. Westpac's cover scores 57.44.
What accounts for the difference?
Lots of features are left out, deliberately. This makes the product much simpler, and cheaper. The absent benefits range from tiny and rarely used to more significant and familiar features. Here are three illustrative examples:
Travel and transport features can account for up to 0.14 points in the comparison and are not present in this product. They are rarely claimed on and will not be missed by the budget conscious.
Trauma and TPD benefits are more significant, accounting for 3.6 points. Some advisers like to see income protection as a catch all product, but others say that if they want Trauma and TPD they will buy them in their own right for the right amount. This product leaves you to add them on if you want them.
The absence of a hospitalisation or bed confinement feature is one that may make you pause for thought. It cannot be added separately and some clients will expect that a benefit bad enough to put you in hospital 'ought' to pay you something.
You should check a full research report to identify all the differences.
There are also some significant structural differences:
The benefit payment basis is Indemnity, unlike every other product in Asteron Life's income protection range which is Loss of Earnings or Loss or best of both LOE and Agreed Value. This has an effect on the amount score weighting because the regular long term benefit cannot take post-disability income above 75%, whereas in the Loss of Earnings configuration it could result in a total replacement ratio of 93.75%. You simply cannot build a budget income protection with a super-high replacement ratio like that. So this change is to be expected.
The short-term benefit is 'own occupation' definition. Most disability claims are short-term. Re-training is also not a short-term option. This fulfills the essential peace of mind requirement. This period is limited to one year, however, followed by a different definition for long-term disablement.
The long-term definition of disability is based on a test of being unable to work in an occupation to which you are suited by "education, training, or experience." The fact that is not 'own occupation' will disturb some, but this is not the valid point of comparison. This product is about bring people into the income protection market that are either contemplating a two-year benefit period or no cover at all.
Partial disablement is subject to a work ability test not merely whether your claimant is or is not engaged in part-time work. Partial disablement is a feature that gets a lot of focus, but is in fact used much less than is thought. We are unsure how much difference the work test will make. We have made a deduction in the rating for it, but will seek more data in the future on how it is used.
There are some features which are better than market:
We particularly like that occupational retraining, rehabilitation and home modifications benefits can be accessed from the point of claim notification. There is no requirement for a period of total disability. This resulted in us increasing the weighting for these items and applying a penalty to insurers that do not permit access from day one. We have asked Asteron Life for more data on the use of these features and will be contacting other insurers to ask them for information on their use as well.
There are some unresolved features:
We expect to add a score for claim on leave without pay and unemployment. There are no explicit provisions for these but they will be covered under the long-term benefit. You can expect to see them added to the rating next week bringing an additional 1 to 2 points to the score.
Some issues of weighting have been raised:
Optional redundancy insurance items are probably weighted too low in the overall model. Various 'back to work' features may need to receive an increased weighting. We will also review the gap from the best to worst rating in the income protection range to see if that reflects probable claims experience.
We have just added separate workshops for Dunedin and Invercargill - see below for details and links to register.
Tuesday 15 September
3.15pm start time
Wednesday 16 September
9.00am start time
Ascot Park Hotel
Total life industry in-force premium was 2.2 billion at the end of calendar year 2014, up from 1.6 billion at the end of 2009. Annual growth averaged about 5.6% in the five years. Source FSC statistics.
If we can make substantial in-roads into the under-insurance problem the industry could be a lot bigger.
This sorry tale highlights the need for better systems to prevent fraudulent applications for insurance.
It is probably true that no system can be made entirely proof against a determined attempt at fraud, but some measures can make it a lot harder.
- Random identity checks on cases, which can amount to a call to the applicant to check some details on the application form.
- Systems which pick up the multiple use of addresses, bank accounts, or direct debits
- Exception reporting which flags agencies with a sudden increase in activity
Here at Quotemonster we are busy working on finding a way to rate the extended range of Trauma options offered by a number of companies shown below.
Advisers that have used any of the above products, and especially if you have helped a client with a claim of one of them we would love to hear from you.
We will let you know as soon as they are available on the site.
A new survey conducted by the Commission for Financial Capability and the FMA asks how well New Zealanders older population are planning for their retirement.
The survey found that only one in ten people aged over 50 are certain they have enough money saved or invested to enjoy the lifestyle they want once they stop working. Of those already retired, a quarter said they do not have the money to do the things they would like in retirement.
Read the full press release here.