moneyblog

Chatswood Moneyblog Cake Day

Thank you for your support - as this is the birthday of the Chatswood Moneyblog which was born on this day in 2004. Blogging is an activity I recommend to anyone for whom writing for business is a valuable skill, and staying current with the industry news is important. If you want a strong grounding for your continuing professional development, then this is it. Soon we will break 200,000 page views. We have hundreds of industry subscribers, and the blog is just the tip of the iceberg. Quarterly emails are well received, along with the 60 page quarterly industry news digest (for subscribers) and the numerous conversations we have with people - sometimes started because I said something vague, or incomplete, or even stupid - where I get to learn and gather another piece of the ever-changing puzzle that represents our industry. 

QPR Database Update

There have been a number of updates done in the QPR database recently (QPRV104) and subscribers now have access to these changes which include:

• ANZ new policy wording added for Life.
• BNZ new policy wording added for Life, TPD, IP, and Trauma. Main change to heart attack definition for Trauma.
• AIA new policy wording added for Life, Trauma and TPD.
• AIA Business Life and Business Trauma Standalone reviewed (Accelerated is still under review)

Research on Quotemonster also reflects the changes with are applicable.

Germany: Healthy Throughout Life

This article discusses the life expectancy of different regions across Germany. There are a number of great interactive tools demonstrating different trends. The article states that Germany spend over 500 million euros every year on preventative measures through health and long-term care insurance schemes. Take a look at the whole resource - I would be interested if anyone could point me in the direction of the equivalent for New Zealand, meaning those parts that look at major contributors to mortality, and access to health services. 

Are You Insuring Your Lender? Or Your Home?

Just covering the loan is 'home loan insurance' and a lot gets sold. I write about preferring an approach which promises 'you get to keep the home' insurance. That is my recent article at goodreturns - Link. 

FMA Update: proposed exemption to facilitate personalised robo-advice

Rob Everett, Chief Executive of the FMA has provided an update on the progress on the draft exemption, indicating we can find out more in October. Also, I like that there is a defined approach to supporting innovation, and even in the absence of an exemption, or the changes proposed in the new Financial Services Legislation Amendment Bill, the FMA is approachable on this subject.

"I’d like to thank all those who responded to our recent consultation on a proposed exemption to facilitate personalised robo-advice. We had a large response to this proposal and are now considering all the feedback before finalising our policy in October.

The growth of fintech and emergence of innovative new products and services is not going to stand still, so neither should we.  Our approach to robo-advice reflects our support for new platforms, markets, products and services, and the fact that, ultimately, we’re here to help markets work well and businesses succeed. We operate in a flexible financial regulatory system and have the tools to respond to what the market is doing, rather than what it might have done five years ago. 

If you are developing an innovative new financial product or service, we’d love to hear from you as early as possible in the design process - this will help us to help you. You can read more about our approach to supporting innovation on our website."

Future Premiums on Quotemonster

For those Quotemonster users who subscribe to research you will see that we now have estimated future premiums on the Head to Head reports. Please see the example below for AIA and ANZ for Life Cover. 

Related articles

moneyblog: ANZ Wealth Sale: Process and Announcement

CBA Considers Sale of CommInsure and Sovereign

Momentum Life, documents, rates and more

Momentum Life is a brand that sells a Fidelity Life insurance policy (in New Zealand). They sell through online lead generation, and then call the customer back. The product is a non-underwritten insurance policy with an extensive set of exclusions including: 

• pre-existing conditions
• occupations
• heights
• depths
• speeds 

You can access a policy document at their site, or at this link:  Download MomentumLife_Life_Insurance_Policy_Wording and you can take a look at their exclusions document too: Download MomentumLife_Life_Exclusions_&_Limitations.

We're pulling together a price comparison right now, which will be added to our bancassurance and direct premium comparison tables. However, this is expensive when contrasted with underwritten cover. That explains, perhaps, the reluctance to quote online. It must be remembered that this is a convenience purchase, and like comparing convenience food, to shopping at the supermarket, it comes with a cost. One case we priced recently is 67% more expensive than Fidelity Life's underwritten price for the same cover. That gap is similar to the premium difference between Sovereign's TotalCare and their Simple Life. 

A preliminary look by Quality Product Research rates them as follows (assuming a male age 45, occupation class 1, self-employed, taking out $500,000 cover) 

• Sovereign (underwritten) 105.04 points
• Fidelity Life (underwritten) 105.55 points
• ASB / Sovereign Simple Life (non-underwritten) 93.87 points
• Momentum / Fidelity (non-underwritten) 99.15 points

 

Money week focus: good debt, bad debt, and what debt you need to insure

Money week has started out focusing on debt. Debt happens to also form the core of the capital needs analysis when insurance planning is being considered. So much so that typically insurance advisers start the needs analysis by aiming to clear all debt in the event of death, and add other needs on top of that. What's right and what's wrong with our view of debt. 

Diane Maxwell at the Commission for Financial Capability is quoted in this article by Tamsyn Parker at the NZ Herald on the subject of debt. It is worth taking in how people can make a decision to get into debt for items that would traditionally be called 'bad debt' - like borrowing for a holiday, or large consumer electronics purchase. Most people know that taking out a loan on such items is a poor financial decision - but they feel that they have worked hard and deserve this. Those views may not add up to you, but they are real for a wide range of people. The impetuous decision comes more easily under such a rationalisation. Whereas, to the person who has a rule 'I never borrow for a holiday' they then have to save. Saving gives you time to re-asses your goals. Do I want this holiday more than cutting six months off my wait to get into a home?  The nature of the rule is tricky to properly express. Some people say 'never borrow for a depreciating asset' this kind of definition tends to favour the purchase of physical property or listed investments. But what about education? for almost anyone under 35 with the ability, getting a degree in business, accounting, law, finance, engineering, science, technology, or maths will provide big dividends. It should not be excluded from the options. 

So how does this affect your attitude towards insuring debt? For me, it doesn't. I like the idea that in the event of my death all my debt is paid off and there is sufficient money to take care of dependents. But some attitudes towards insuring debt are changing. One bank even defaults their calculator to only insuring 50% of debt. That may well reflect the modern reality of two-income households, but given that life insurance is so cheap (and set to get quite a bit cheaper) for people under 45, then the trade-off in peace of mind might not be worth the extra flat white per week. It is a trade-off I would like the customer to make actively, but that would require an advice process. The overall approach suggests a process in which the belief is that the customer is highly price-sensitive. Yet our research shows that customers are not that price sensitive until they reach their fifties. They are more cover sensitive. Go back to the emotive rationale for bad debt and you will see that price wasn't the dominant factor in that decision either. It was how they felt about the outcome. Talking about outcomes enables the client to make a better decision. 

 

 

Susan Edmunds on the need for Income Protection

Susan Edmunds has written this excellent piece on the need for more income protection insurance to be sold. The shift to living benefits is gathering pace, but we can use all the help we can get to change societal views about what kinds of cover should routinely be bought. 

Welcome to Money Week

Sorted, the public face of the Commission for Financial Capability, is promoting its annual financial literacy event "Money Week". Money Week runs from the 14th to the 20th of August - it is a great reminder to catch up on the resources that Sorted makes available to support improving financial lives. 

We like it when we can make your job easier

I was delighted to find Anand Srinivasan has given us a testimonial: 

“Quotemonster and QPR gives a good balanced view of product comparisons and ratings are client specific and not generalised. More importantly the team at QPR are an extension of my office always willing to go the extra mile when special reports are required which, in turn, enables me as an adviser to assist client in making an informed decision."

From Anand Srinivasan – Winner of PAA New Insurance Adviser 2017, PAA Judges Excellence Award 2016.

 

Life cover buy-back on TPD -- who uses it?

If you use the optional life cover buy-back features on TPD benefits regularly can you please drop me a line - I'm keen to learn a bit more about your advice process. Given that TPD benefits are relatively little used, it would be good to meet a real advocate for them, who gets into the details and options. 

Sham Surgery

Seth Godin has recently written an article discussing the power of placebos. Sham surgery is a 'fake' operation where the patient is dressed in a hospital gown and taken through all the regular pre- and post- surgical rituals such as fasting, anesthesia and having an incision made to their skin to make it look like surgery was actually performed.

A study conducted of a number of elective surgeries in the US found that more than half of the time patients would have had at least a good an outcome - as measured by their own perception of success - if they had undergone sham surgery, as real surgery. Click here to read Seth Godin's post.

Although this is being billed as demonstrating the power of placebos, there is another direction to consider. The low success rate of the actual surgeries may be because of an over-referral for surgery, because of the incentive created by the presence of the medical insurer. 

Friday Fun: The Monster at the National Adviser Conference

Terribly cheesy grin. But if you had your picture taken with the Monster last week please call or email and I shall email you a copy. 

AMP's half-year results

AMP recorded a small lift in operating earnings on flat annual premium income and a seven percent increase in the value of funds under management. Link.

Why predictions in the life insurance business are so lousy

Goodreturns has just run an article title 'how to protect yourself from churn claims' and details the results of complaints to dispute resolution bodies. The article, aimed squarely at advisers, makes some good points - but what really caught my attention was not how many complaints there were, but how few, given that there are many cases that have been replaced, and one hears stories of this type of cover loss all the time. It is a genuine problem, with a likely scale greater than the number of actual complaints. 

Life insurance is a low involvement product. That means customers don't engage much - either in frequency, or emotionally. The number of interactions between a customer and an insurer are relatively few - contrast your own frequency of communicating with your insurer to that, say, of your bank. Even within types of insurance it varies a lot: travel and motor vehicle insurance get lots interactions, life insurance very few. But it isn't just about how often you talk with the insurer. Think about a new car purchase, even people that aren't really into cars will notice. You probably considered lots of options, choices, and discussed the purchase with many different people. Some people feel very connected to their cars, passionate about the vehicle brand, and what it says about them. That tends not to happen so much with financial products, and life insurance, least of all. 

All told - that means you can make accurate predictions about the direction of change in the life insurance industry, but it is easy to be surprised by how slow that change is to come about. 

Partners Life: Seminar - Closing the Written to Issued Gap

Here is a introduction to Partners Life's upcoming Seminar featuring Naomi Ballantyne and Hayden Jonas as presenters.

End of life conversations can be hard - will this make the easier?

Financial advisers jobs, it seems, is to help people navigate some tough conversations. We hear that often people haven't had an organised talk about money until a good adviser helps them through it. With insurance advice the subject to be raised is death and disability - providing for loved ones should bad things happen. Just the planning and insurance can be bad enough, but having helped people that way we hear that advisers often become family friends. Invitations to weddings and 21st birthdays, and then later, when the time comes, they get asked about how to organise things when it is obvious life will end. There are lots of resources to help. I recommend Atul Gawande's book 'Being Mortal'. Now there is this - 'Hello'. 

CBA Considers Sale of CommInsure and Sovereign

CBA, the parent company to both CommInsure in Australia and Sovereign in New Zealand, are contemplating a sale: 

“We are in discussions with third parties in relation to their potential interest in our life insurance businesses in Australia and New Zealand,” CBA said

That comes quickly on the heels of the announcement that ANZ may be near concluding a sale of their insurance business. 

Commerce Commission: General Insurance Market "Vulnerable to Coordination"

The Commerce Commission concerns about the general insurance market are good reading for anyone interested in the efficient operation of insurance markets. Some of the features of the life insurance market which insurers don't like much (like consumer-facing price comparison websites - think Lifedirect at TradeMe) are exactly what the Commerce Commission would like to see operate in the general insurance market. You should read the whole article, but here are a few quotes: 

• Product prices and terms are sufficiently transparent to competing insurers, while being opaque to many consumers, and there are incentives to achieve coordination…
• There is some evidence that prices for HCMV insurance sold via banks are higher than in the direct channel, which may be at least partially attributable to the commission insurers pay to banks to compensate for distribution…

The role of advisers in helping to keep the market honest is acknowledged in passing in some of the comments as well.