In this article on Stuff Rob Stock explains the consequences of getting caught carrying out a fraudulent insurance claim. Petty criminals and bankrupts have their records cleared after a number of years but once a person attempts insurance fraud it stays on the records permanently.
Natasha McFlinn, IAG's fraud intelligence manager says 10 per cent of claims by number contain elements of fraud. Among commercial claims it is around half that, and around double for travel insurance claims. Those figures have not been externally verified.
The Insurance Council estimates, fraud adds around $350 million to the cost of insurance each year.
A number of problems including past criminal offences are stopping people creating new lives for themselves from getting insurance. This article on Stuff mainly discusses a case study relating to general insurance and how there are specialist brokers who help find cover for the uninsurable.
Consumer NZ has warned that Funeral Insurance could be the most expensive way to pay for your final send-off. 'Consumer NZ reviewed 10 policies offering $10,000 funeral cover for a 64-year-old. The review found that by age 84 the amount paid in premiums exceeded the $10,000 cover with most policies. In some cases, the insured person would have paid twice what they were entitled to be paid out.' Read more from this article on Stuff.
We are continually surprised to find that as many as a quarter of all funeral cover clients could have easily purchased fully underwritten cover. They were simply attracted by the convenience of not having to answer health questions.
Can a client buy insurance without paying commission? Will it be cheaper? The answers are "Definitely Yes" and "Probably No." Here are the main options available.
Direct Nil Commission Products
Most 'direct' insurance companies do not charge any less than full commission offers. Some do, some don't and there is a value for money equation to be considered because many such products do not offer the full range of features offered by advisers. Although some come with advice, most do not. Even those that do come from a full advice channel there isn't usually as much choice of insurance provider. The value that they deliver tends to be based on the bits you cannot see: they save you time by having very short forms (sometimes with no health questions at all).
But if a client is interested in an advice process which is based purely on a fee and has no commission component then this may be a way to get the lowest cost over time. Nil commission offers by advisers tend to come in the following versions.
Nil Commission Products and Fee Payment
Choosing a nil commission product and charging a fee direct to the client. There are very few of these services offered as a main way of doing business. Most advisers, however, will offer this as an option under some circumstances. Limited duration but large premium cases for business insurance are one example. Another is for cases with very complex underwriting. In such cases the total reduction in premium can be around 20%.
Whether or not this is a good deal depends on the size of the fee and how long you will hold the cover for. In the purest form of this service the fee for advice is payable irrespective of whether the client proceeds to buy the cover. A separate fee may be charged for handling the actual application. Fees will be payable whether the case is accepted by the insurer or not. For clients used to not having to pay a fee, both funding the fee, and having to pay it even if the application is not successful may come as a shock. As with all pricing and scope issues in financial advice, clear communication is the key.
We have heard of fees from $475 to $2,000 for normal advice processes for one person with moderately complex cases. Really difficult cases with a lot of underwriting challenges would tend to be hourly paid and could work out to cost a lot more.
Fee Offset by Commission
Another version of the process is to charge an explicit fee, take full commission, and allow the commission to offset the fee. In this case the premium remains unchanged - there is no ongoing discount. The client enjoys the benefit of not having to fund the fee themselves. This approach is carried on by a good number of mortgage advisers, but rarely by insurance advisers.
The version which is most commonly practiced includes a fee only if the application is unsuccessful. This can be seen as a minimum fee and all the commission is kept by the adviser for the case. This is another situation in which crystal clear communication of the fee is required, I understand a lot of complaints about fees of this type are received by complaints bodies.
There is an alternative which is more transparent where the adviser discloses the value of the full commission and rebates the excess above the fee (after any applicable responsibility period). As an aside, although some people say that there is no requirement to disclose commissions at present, I am not sure how one can meet the requirement to disclose conflicts of interest without telling clients about commission. Proponents like this because of the reduced strain on the client and the fact that it leaves service or renewal commission payments with the adviser to pay for ongoing support.
According to this article by Chantal Marr there is an increasing need for millennials to have critical illness insurance. 'A study done by the Neurology journal found that the rate of strokes among people in the 20 to 54 age group has increased from 13% to 19%.Furthermore, certain types of cancer such as leukemias and lymphomas are more common among young adults than older people.'
Although the absolute rate of strokes remains low for younger people the trend is important. Why are cancers strokes, and such like more prevalent in younger people these days? One issue is earlier diagnosis - testicular cancer, for example, is typically diagnosed years earlier than it used to be. The other is increased survival. A stroke used to be fatal more frequently. This is all part of the shift from insurance of your life to insuring your lifestyle. The shift to living benefits is gathering pace and driving more lapse and replacement activity.
According to research discussed in this article on Forbes 'one in four of us will have a disability during our working years that will leave us temporarily unable to work.'
The scenario described in the article shows the difference Income Protection insurance made to one person who was unable to work for two years versus their partner who was in the same situation without Income Protection insurance. The difference may surprise you.
'There are claims hundreds of New Zealand women are missing out on the latest technology to significantly speed up the treatment of early stage breast cancer.' This article and video from One News says 'The treatment (Intra-Operative Radiotherapy) provides a one-off, single dose of radiation to the cancerous breast at the time of lumpectomy surgery, eradicating the need for patients to travel to hospital post-surgery to receive the radiation necessary to prevent the cancer's return.'
The article claims that 'In New Zealand there are currently six health insurers who cover this treatment for their members, however the country's largest insurer Southern Cross does not.' Two of those health insurers are Tower and OnePath, which are both now under the nib banner, with ANZ distributing the nib product.
Southern Cross disputes the efficacy of IORT. It has reviewed the effectiveness of the treatment twice, finding results were mixed:
- "IORT patients showed a higher rate of cancer recurrence
- The treatment was so new that non-inferiority had not yet been established in the available data
- The treatment was still considered experimental."
They add that:
"...Southern Cross is currently undertaking an assessment of IORT and is waiting on data to confirm its clinical safety and effectiveness. If the results are favourable, and the decision is made to add IORT to the list of benefits covered by our insurance policies, we will advise members of this."
All premiums below are calculated on a 35 year old female, non-smoker, class 1, $5,000 per month, Indemnity, indexed, 4 week wait to age 65 (no extras).
There are claims hundreds of New Zealand women are missing out on the latest technology to significantly speed up the treatment of early stage breast cancer.' This article and video from One News says 'The treatment (Intra-Operative Radiotherapy) provides a one-off, single dose of radiation to the cancerous breast at the time of lumpectomy surgery, eradicating the need for patients to travel to hospital post-surgery to receive the radiation necessary to prevent the cancer's return.'
In New Zealand there are currently six health insurers who cover this treatment for their members, however the country's largest insurer Southern Cross does not.
In this article from Michael Kitces he outlines the key elements for turning financial adviser website visitors into prospective client leads, including the following: