In this article by Rob Stock he discusses the review of insurance policies by banks in New Zealand after recent scandal involving the Commonwealth Bank of Australia.
Quality Product Research compared the NZ policies in our recent roadshow - you can view the presentation here.
Quotemonster already helps more than 3,700 advisers to do price comparisons on the most popular insurance products in the market - completely free. Out of them more than 1,300 advisers have also discovered the power of insurance product research to help them identify the meaningful differences in product, personalised to each individual client based on their age, gender, occupation, and product selection choices. But just a couple of hundred advisers are “power users” sucking every possible advantage out of the system. These are the extra services that they use to build the best insurance report possible.
- Head to head – a more detailed comparison of just two products ‘head-to-head’ showing the differences between them to help your client make an informed choice.
- Underwriting requirements – based on your client’s choice of products and sums insured we do the hard work of picking through the non-medical requirements and produce a report which shows exactly what paperwork, tests, and exams are required. A huge time-saver. Really useful for clients scared of needles. Eliminates ‘you didn’t tell me that’ objections.
- Statistics that help you sell: everyone can add a personalised client risks report which tells your clients their working life risk of death, total disability, temporary disability, and trauma.
- Recommended product premium choices: if you have chosen a specific company to recommend but you don’t know whether the client would prefer a wait period of 4, 8, 13, or 26 weeks, or perhaps an excess amount on their medical of nil, $250, $500, $1,000, or more? This makes it easy: it includes a table of all the different premiums for each option at the end of your price comparison report. Saves lots of requoting.
- Needs analysis – enables you to develop a scope of service, set objectives, record what advice your client wants, capture basic financial information, and calculate an ideal cover package – in minutes, not hours, and adds all that data to the comparison report. Automatically sends the values to the quote saving more time.
- Historical policy documents are searchable by date, company name, and type.
I've recently been sent a great piece from Gen Re on heart attack definitions. At the start of what is a pretty through review of the use of different diagnostic techniques they ask some great questions which bear repeating:
Although medical definitions are part of an insurance contract, suggesting an absolute meaning, the insurer’s claims philosophy must address questions such as, “What is intended to be covered?” or “Is the condition covered even if not all claims criteria are fully met?”
This should be contrasted with a media which has a taste for black and white declarations on the subject, such as recent articles which talk about '...using “out-dated” medical definitions in their
Trauma (Critical Illness) policies" that was a quote from the Australian media, but it happens that Rob Stock wrote about this very issue in an article published this morning (at this link).
In their review Gen Re talk about the value of being clear about what is intended to be covered. In doing so they talk about impact, impairment and loss: all reaching back to a concept that should be behind every insurance, the principle of indemnity. Put another way, insurance shouldn't be a kind of lottery where a small heart attack could trigger a financial 'win'. In order to have affordable products which can protect us all from real losses we need to have payments that broadly match impacts. So Gen re suggests that insurance wordings may never match the terms used by medical staff, and that perhaps they never should. That is why I am not in favour of a general ban on some more restrictive conditions, but I am in favour of clear communication of what we mean by each definition, in terms that at least most people reading the document can understand (see my post at this link). Indeed, there are many circumstances in which having a tough definition is preferable: one is when you want to reduce cost, another is when you only want a payment triggered by a serious event (such as shareholder protection). But whatever the wording, if an insurance definition differs from a medical term the customer should know how and why. To prevent 'scandals' the customer probably need to know that before they buy, not right after they claim. The challenge is that when buying the cover, clients are rarely that interested.
For those advisers that like the idea of a lower, non-taxable, income protection benefit the potential for a review of the taxation of income protection adds risks, or complexity, or both.
For example, if a future review were conducted by Inland Revenue, and the position were changed so that all IP benefits (AV, LOE, or Indemnity) are deductible and taxable then those clients with existing AV benefits may have a problem. If the tax position changes for in-force contracts then they probably need to buy extra cover. A boon, perhaps, to insurers and advisers, but difficult for some clients that have developed health problems in the meantime. Alternatively the change could apply from a certain date forward, adding to the complexity of giving advice to clients with in-force AV contracts which will remain non-deductible and non-taxable. Insurers could make like easier for advisers by allowing a one-off increase to the benefit if it is deemed to be taxable. They are only likely to be tempted to do this if there were better information and enforcement around the taxation of IP benefits.
We continue to hear of complaints that claimants do not declare their income and then discover that they have unpaid tax problems to add to their health issues. Which brings us to the other eventuality: assuming everything becomes non-deductible and non-taxable, then the reverse problem applies. Some may seek to reduce their benefits, a one-off hit to insurers. But the gains to consumers and reduced replacement ratios may be worth it. Each of these costs probably still outweigh the complexity of staying with the current situation.
Emma Conyngham, a Kiwi breast cancer survivor has come up with a unique product, 'NiceNips' for women after having a mastectomy. Click here to see what it is.
Zurich have done an international survey and find that people underestimate their personal risk and overestimate the cost of coverage. You can read more and download the full report at this link.
The result: they assume that coverage is not needed and too expensive. There is, of course, a solution. We have to tell them what their risks are and show them that coverage can be cost effective. Because they won't be looking out for it, the message needs to be attractive, positive, and engaging. Moaning about underinsurance doesn't tick any of those boxes. Creating engaging content looks like the better way to go.
MBIE has released a summary of the review of the Financial Advisers Act - which you can access at this link: Download here.
The key points we like are:
- A determination that everyone that wishes to be called a financial adviser or to give financial advice must meet a client first obligation and abide by the AFA Code (albeit an updated one offering standards relevant to the area of advice being given).
- A commitment to keeping the cost of the regime low.
- Erasing some of the perceived boundaries between QFEs, RFAs, and AFAs. Instead focusing on competence to offer advice.
- A focus on disclosure to manage conflicts of interest created by different systems for remuneration for advisers.
There are other expected changes such as requiring a greater connection to New Zealand for registration as an advice business in New Zealand. All the better to head off any problematic uses of representing the FMA as your regulator when, in fact, your business is entirely based in another country and is in no meaningful way regulated by a respected New Zealand authority.
Some areas leave questions open. The licensing regime for organisations could be great or could be terrible. We can only hope that when written it is done well. A similar concern applies to other areas where details must be worked out. However, I am optimistic that they can be worked out well. Some things I just simply do not like: why choose the word 'agent' for example.
Tom Hartmann writes this article for NZ Herald and suggests looking at your financial plan like you do at Google Maps. "First there's the blue dot: where we are now. Then there's the red pin: where we want to get to. And to connect the two, there's the squiggly blue line: how you get there."
"For example, let's say we drop a red pin goal of $1,000-a-week income in retirement, in 25 years. Depending on the blue dot of where we are now (how much we're setting aside for the long run), we can chart whether we're on track or not. If we're going via KiwiSaver, we can estimate whether we'll arrive at the destination on time. Maybe we'll need to adjust our settings or find additional ways to fund those years after we stop working." Hartmann says and directs readers to Sorted's Retirement Planner Calculator.
On www.quotemonster.co.nz research subscribers can now quickly pull together all the data required to make compliant recommendations really fast. Our aim was to build the simplest possible needs analysis that really works.
Whether you prefer a statement of advice or record of advice approach, no one makes it as easy as we do to capture client needs and objectives, basic financial information, set scope limits for the engagement, and provide two alternative ways to calculate and capture requirements to suit your advice process.
Speed and simplicity are the aim, not complexity or very broad scope. So if you are a technical specialist with a current needs analysis approach you will probably choose to give ours a miss. That's fine. But if you are yet to move to a system-based needs tool, or you sometimes prefer a no-advice sale because needs analysis is too time consuming and difficult in your current system, then you should take a good look at ours. The intention is to make it fast and effective enough that you can use it every time.
To start using it, start crunching on Quotemonster. When you have entered the client details in step one you can then click on 'Needs Crunching' and work through scope, objectives, financial details, and needs analysis. There are two alternatives for the calculations - use our calculations (there is flexibility to change the base assumptions) or simply use a form to record your own calculations and rationale.
When you finish the analysis push one button and all your recommended covers and values immediately appear in your quote. Another couple of ticks and you have added product research and underwriting requirements to the report.
That means you can gather the data for a comprehensive recommendation in minutes, including: Price comparison, product comparison, head-to-head page, underwriting requirements, client risk report, and now, needs analysis for your clients. Its free for research subscribers for the next few months. If you are not a research subscriber call Alan or Kelly for a special deal on getting access.
The tool is in Beta, which means we are still planning several revisions and rely on getting your feedback in order to help shape those changes. So we would like you to complete a needs analysis and let the Quotemonster team know.
nib recently reviewed their rates for July - September 2016. These changes are applicable to renewal customers only. There was not a rate increase for new customers for this quarter.