Financial Advice New Zealand Working Group are hosting a number of adviser forums around the country in January and February 2017. Click here to view details and learn more.
The financial planning benefit usually pays around $2,000 for either financial planning or legal assistance when a life insurance claim is payable. It is a very valuable benefit, usually paid in addition to the sum insured. Given that when someone dies there are always money issues, always legal issues, this helps to ensure that the family gets most of the actual sum insured. But they vary, a lot.
- The amount: from zero to $2,500
- Sometimes the benefit is only for financial planning
- Others pay legal expense as well
- Whether there is a minimum sum insured - below which no financial planning benefit is payable
- The period in which you can claim
Its for these reasons that scores can vary - quite a lot in this case.
Imagine you bought straight life cover, which of the following is easier to read and understand:
- 164 pages including cover and schedule. 19 directly relevant to life cover. In order to understand a clause you routinely need to refer to schedule, definitions, and the clause itself.
- 8 pages long, including the cover. 4 pages directly relevant to life cover. No schedule - the client name, cover amounts, and product choices are shown, where needed, in the document. Definitions are shown in the text as required. A copy of the client application is included.
Both of those are real documents for products on-sale in New Zealand today.
Of course, if you are an insurance adviser or professional working in the industry, you know how these things work and they may be invisible to you - its not that hard, you think. But recent testing shows that as many as 45% of people struggle to comprehend these documents.
Given that we know the problem, we know the effects on customers, and we know the solution, it is getting harder and harder to accept the idea that long, difficult, and confusing documents are an accident.
This article from LSM Insurance discusses the impact of genetic testing on Life Insurance. Some 'hard testers' feel that insurers should be able to use any information to form a view on underwriting. Others are concerned that genetic testing may be able to pick up future problems so early that it will deny coverage to many people. In the United States this problem is more vexed than it is here: because state by state the available minimum safety net may vary, and back up coverage, such as Medicaid, is dependent on income and other factors. In New Zealand we could opt for an approach which allows a lot of genetic testing because of the more extensive state safety net that exists for everyone - hopefully that would allow prices to fall.
This article in NZ Herald writes 'In a speech to the Association of British Insurers, Andrew Bailey, chief executive of the Financial Conduct Authority, suggested that big data could be used to "identify customers more likely to be inert" and insurers could use the information to "differentiate pricing between those who shop around and those who do not."
NZ insurers are already interested in customers' behaviour such as health, eating, medical visits, and activity levels, but those have yet to influence premiums other than to provide discounts. It is also worth bearing in mind that any consumer that doesn't shop around tends to get a different deal compared to those that do - but the results are equivocal, and with insurance a hidden risk may prevent much more 'shopping around': the risk that in switching a previously covered health condition may no longer be covered. Consumers should therefore consider new terms before making a decision to relinquish existing cover.
Sara Cobbett has written an interesting article on LinkedIn discussing the findings of a study which had 11 year-old's read and reflect on life insurance policy documents. That's right - testing policy documents on children, because this is the state of adult literacy:
The UK's Skills for Life survey that out of adults aged 16-65 the following had poor literacy:
- 25.8% had literacy equivalent of GCSE grade D to G
[Translation / equivalent NCEA level one, age 16 equivalent qualification - not achieved, or failed English at School C if you are a little older]
- 15% had literacy level around 11 year-old standard
- 5% had literacy skills of a 5-7 year-old
That's a total of about 45% of the UK population. Reading ability comparisons are available, we reviewed several when we were designing readability scores, and the situation here in New Zealand is not very different. Sara Cobbett poses some good, challenging, questions about the design of policy documents, given that situation:
Would you read 50 pages of text about a product you’re about to buy? How about 20 pages? Or even 10 pages? Lower than 10 - say 6?
A cynic in the consumer movement might say that documents of 50+ pages, lots of long words, and compound documents (requiring a reader to look at several parts of the document such as schedule, definitions of terms, definitions of conditions, and even separate documents) all add up to a very effective way of ensuring that consumers do not know what they are buying. I prefer to think that we just gradually got ourselves into this mess, with plenty of help from legislators and lawyers along the way, and we now need to sustain long-term effort to get ourselves out of it.
The whole article is well worth a read. If you care about reducing complaints and improving the communication with your customers, whether you are an insurer writing policies, a financial adviser writing advice, or a direct marketer writing ad copy, you should read the whole article. Click here.
For those people obsessed with the best, nothing will do but number one. But a focus on ranking can hide a multitude of problems, which is why Quality Product Research scores products, it doesn't rank them. Take these examples:
Which would you prefer the number one product, or the number two? Well, in the absence of any other information, number one please! But what if the number one product was double the cost, but only a tiny bit better?
So maybe now we're looking at second and third place, which shall we buy? Well, in the absence of any other information, number two please! But what if number two has one feature which is important to you but is worse much than the number three?
So now maybe it's product number three... but actually it's within a half a percentage point of being the same as product number four, five, and six.
Now what if one of those is slightly better for me, but not quite so good for my partner?
Like many purchase decisions, insurance has trade-offs. We haven't even begun to talk about service, customer preference, or other matters. The point is this - if picking your insurance product were as simple as taking the one which scores highest, you wouldn't need an adviser, and the robo-advice programming would be pretty easy.
Accuro have partnered with Skin-Vision, a Nethland-based app, which will enable its members to self-check for signs of skin cancer early on using their mobile phone. Click here to read more.
So how does Skin Vision work? You download it in your mobile phone, enter your details to create an account and then follow these three steps:
We usually think of an illegal act as a crime or at least, an action the insured person took that was a breach of the law. The example we often give in workshops is that a person got drunk and drove their car. Most fully underwritten insurance will pay anyway - the best policies have no exclusions at all after an initial period. Some insurance policies decline to pay for illegal acts, but many people that take these policies out assume that because they are generally law abiding, these exclusions will not apply to them.
We invite you to consider this case, that FSCL reports. A claim was declined under the illegal acts exclusion when a passenger in a car died because she had not put her seat-belt on. We are worried about this decision, because mere forgetfulness, especially on the road, could mean many claims arise from an 'illegal act'. The lack of clarity for consumers who may not realise that an illegal act includes, essentially, a mistake or forgetfulness, that means a breach of the road rules. Road accidents are a common cause of early death and many accidents resulting in the death of the insured may have been caused, or contributed to, by acts such as straying over the speed limit (however momentarily), drifting out of lane, or failing to take another look at an intersection - thereby failing to give way.
Illegal acts exclusions could represent a much bigger problem than most clients realise.
Click here to see which four NZ insurers exclude unlawful acts. Create a report in Quotemonster to be able to show your clients the differences between products.
Here are a list of commonly asked questions or queries about Quotemonster:
- The premiums don't match insurer quote software - be sure to check your Settings
- Can I get a copy of your posters? Find all three of them here
- I am unable to save my PDF report - follow these easy steps for a fix
- Why can't I see the banks? One of these suggestions should help
- Can I duplicate an existing quote? You sure can
We have recently developed a user manual full of useful information about all of the functions and tools available on Quotemonster - please do have a read through.