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Australia: Quality of Risk Advice Unchanged

This article on riskinfo.com.au claims that ASIC states the level of non-compliant life insurance has not changed since the release of Report 413 in late 2014. However, changes are, apparently, expected after the introduction of commission caps and claw-back arrangements.

 

 

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Australia: ASIC's churn estimate drops by 90%

Australia: Banks and their Insurance Businesses

Sitting is bad, getting up helps

Many studies correlate sitting for long periods of time with many causes of death. More research needs to be done but early studies agree that getting up frequently and moving around can help a lot. This article has some of the details - Link. I converted to a sit-stand desk a couple of years back and do find that it help - in many ways - and I can often get home physically tired as well as mentally tired on more active days. 

Australia: Life Insurance Statement of Advice Estimated at $1,500

According to ASIC the cost of producing a statement of advice is estimated to be $1,500 and can take up to ten hours work. “This estimate is a very general one, as there are many variables that may affect the time need to prepare advice,” ASIC stated. Click here to read more. 

FSC Navigating Change Conference - Photographs

If you were at the Navigating Change conference and would like to check out the conference photographs you can find a good set at the FSC Facebook page - link. 

Sovereign's media release on the transaction with AIA Group Limited

Sovereign's media release on the transaction with AIA Group Limited

Sovereign to be acquired by AIA Group Limited

Sovereign’s parent company, the Commonwealth Bank of Australia (CBA), has today announced that it has agreed to sell its life insurance businesses in New Zealand (Sovereign) and Australia (CommInsure) to AIA Group Limited (“AIA”) for AUD $3.8 billion.

Under the terms of sale, ASB and CBA will enter into 20-year distribution agreements with AIA for the continued provision of life insurance products to customers in New Zealand and Australia respectively. Sovereign and ASB customers will retain all the current benefits of their existing policies, while benefiting from AIA’s worldwide expertise, innovation capabilities and commitment to its customers and distribution partners.

Sovereign CEO Nick Stanhope says: “This transaction represents the next exciting stage in Sovereign’s evolution. We are the product of several mergers and acquisitions of our own – so the prospect of becoming part of the AIA family, as our industry continues to consolidate globally, is an exciting prospect.

“We remain dedicated to providing our customers with the best products and service and we are confident that this will be a great fit for our customers, distribution partners, and our people,” Mr Stanhope says.

AIA Group Chief Executive and President, Ng Keng Hooi, says: “The new long-term partnership will significantly expand our access to potential new customers and enable us to engage with them in a new way through CBA and ASB's extensive retail bank networks. We look forward to welcoming our new customers and colleagues and to working together with CBA and ASB on our shared objective of increasing life insurance penetration across the banks' 13 million customers in Australia and New Zealand.”

The transaction is expected to be completed in 2018, but is subject to certain conditions, including regulatory approvals in New Zealand, Australia and China. 

For further information regarding  CBA’s announcement to the ASX today, please click here: http://www.asx.com.au/asxpdf/20170921/pdf/43mhnzcfywb1rs.pdf

ENDS

Sovereign to be sold to AIA

 

Congratulations to AIA on entering into the final stages of the process that should see them acquire Sovereign, from CBA.

 

AIA is a relatively small insurer in New Zealand, although it has recently made some big gains in new business market share through aggressive pricing, competitive commissions, and product updates.

Sovereign has a large in-force book but also still commands the largest share of new business in the market through extensive multi-channel distribution. It is access to broader distribution that will have been attractive to AIA, especially the ability to distribute via ASB Bank. 

 

Bank distribution has been a key to scale in the market, as banks account for around 30% of all life insurance based sales in the market. It is hard to become the biggest without a bank relationship – but with fewer large banks than insurers, someone has always missed out. Sovereign also has direct, group, and corporate distribution to bring to AIA.

 

Making the acquisition work is about two key skills: sales, and IT. The ability to capitalise on the opportunity of bank distribution will be central to retaining and growing the sales of the combined business. The ability to manage the many legacy systems at Sovereign, and manage the necessary transformation to a digital future is the other pillar for success. Behind both will be retaining and motivating the right people.

 

It is hard to escape the idea that Sovereign will be subsumed into a big corporate beast at the international level – AIA is the largest insurer in the world. Yet at a local level it is AIA which will probably be absorbed by Sovereign, the ratio of staff being 4 to 1 in favour of Sovereign. Not all the people in the combined business could be retained, as insurance is going through a prolonged period of disruption.

 

At a market level this sale signals the end of the great experiment with bank owned insurers. The prospect of ANZ selling their insurance business, OnePath, in the near future, and discussions about another suggest that most insurers will return to being owned by specialist insurers.

Protections for whistle-blowers reduced in draft Financial Services Legislation Amendment Bill

Merran Keil, Barrister, has concerns that the requirement for protecting the identity of a whistle-blower has been removed from the current Financial Advisers Act with the new draft Financial Services Legislation Amendment Bill. Link. 

Trauma Sums Insured Chosen

The table below shows the trauma sums insured selected. There are some details about the data below, but in summary you can quickly find the most commonly chosen sum: $100,000, following by $50,000, and then $200,000. Although a better interpretation might be: for the population as a whole, most people don't buy trauma. If you look at the cluster of quotes around $50,000 then most people choose much less cover than $100,000, a few choose $100,000, and the rest choose the same cover as their life sum insured. 

 

The chart shows the value selected by for either the only client, or the first client of two, where there are more than two clients. Although the scenario may be crunched several times the value is taken from the most recent crunch, because that is expected the be the iteration closest to an application if that eventuated. It is only for crunches in the quarter to the end of March 2017 on Quotemonster, it includes trauma sums insured from any combination of benefits which included trauma. 

 

Business is a creative process and safety increases creativity

Having a 'hard' performance culture may maximise performance in the short-term but it appears to degrade it in the medium term. Sprints can be useful, and pulling the odd all-nighter to be ready for the big day is sometimes essential, but the default culture of an organisation hoping for long-term outperformance should be something else entirely. From the Harvard Business review we have this article on fostering creativity: 

Barbara Fredrickson at the University of North Carolina has found that positive emotions like trust, curiosity, confidence, and inspiration broaden the mind and help us build psychological, social, and physical resources. We become more open-minded, resilient, motivated, and persistent when we feel safe. Humor increases, as does solution-finding and divergent thinking — the cognitive process underlying creativity.

Link. 

When you read it, it's obvious really. Those cynics looking at policies on corporate inclusion are both right and wrong. Enlightened self-interest shows that policies fostering diversity and acceptance of your team will help people be more creative, and business is fundamentally a creative process. So, how do you do that? Six suggestions are offered in the article: 

1. Approach conflict as a collaborator, not an adversary
2. Speak human to human
3. Anticipate reactions (to challenging messages) and plan
4. Replace blame with curiosity
5. Ask for feedback on delivery
6. Measure psychological safety 

I particularly like the second point, in consulting, sales, and pretty much every human endeavour getting the conversation to 'real' is vital.

Planning for the inevitable: some forethought can help

Financial advisers helping clients with terminal illness claims may find this useful: 

Digital Revolution in Health - MOH Overview

At the recent FSC conference, Navigating Change, there was an excellent panel discussion which covered the area of digital transformation in health services. So often we hear how 'management' shouldn't be prioritised over 'frontline' staff yet the examples given in that panel session showed how digital could enable far greater reach, accuracy, and efficiency in health provision if we could invest more in it. My favourite examples from Doctor William Reedy were:

1. Apps helping teachers to diagnose conditions in kids at school - and forwarding information to specialists for review, resulting in consultations with parents and much earlier intervention
2. Clinics run in remote parts of Taranaki by nurses with doctors consulting virtually.    

Insurers, are fans of digital data too - to enhance underwriting while reducing costs. The Ministry of Health 2020 strategy overview is available at this link. 

 

News speculation on buyers for ANZ insurance and Comminsure

Goodreturns quotes The Australian and I saw a Reuters article today on the likely buyers for two of the largest insurance businesses in New Zealand: AIA may buy Sovereign, and Zurich may buy ANZ's insurance businesses. If true, this makes good sense for both. AIA achieves scale, which it did not have in New Zealand, and valuable additional size in Australia. Sovereign may benefit from being returned to specialist insurance ownership. The same applies for Zurich, and it will be interesting to have Zurich in this market. They may become an effective competitor in the adviser market in New Zealand with the purchase. That is, if the purchases go ahead. 

Sorted: Live KiwiSaver Q&A

On Tuesday the 19th of September Sorted.org are hosting a live KiwiSaver Q&A session. More details can be found at this link.

Causes of Death and Non-Underwritten Products

A little while ago we blogged about the causes of death, the main causes do not change a lot in short periods of time, so the table below, based on Ministry of Health data from 2011, is still a good views of the main causes. The reason for returning to this is to consider the causes of death in relation to the exclusions common in non-underwritten policies. 

Pre-existing conditions, whether with a blanket cut-off at application, or with the ability to include them after five years without recurrence or treatment, are most likely to affect the categories of cancers, heart attacks, strokes, and respiratory diseases. What proportion of these causes are likely to emerge from a pre-existing condition or pre-disposition?

Now look at some of the other categories - take accidents, at 15% of the causes of death, and recall the exclusions relating to heights, speeds, presence on a building site, and certain occupations. 

Lastly, look at the rate for suicide, which might also be considered a death from depression or mental illness, this is one of the top five causes of death at 8% of this group, exceeding the level for strokes. Many of the non-underwritten policies contain long suicide exclusion clauses (up to five years), and increasingly bank insurers are lengthening their exclusion clauses as well (up to three years). 

These are the factors behind the recent changes made by Quality Product Research to the increased penalty for pre-existing conditions exclusions in the product quality database for Momentum Life and ASB Easylife. Other non-underwritten products will be added to the database and scored along similar lines. 

 

Chatbots the first step to economically viable AI

nib are the first health insurers in NZ to offer customer assistance from an artificial intelligence powered virtual bot named 'Frankie'. The chatbot provides convenient  and fast responses to clients queries and allows 24/7 support. Click here to read more.

Initially started by tech companies struggling to cope with the service requirements of tens of millions of users the world over, the implementation of chatbots is now becoming mainstream. Initially the bots can be of limited functionality, but one of the most important learning mechanisms is regularly interacting with customers. The more queries are typed into the chatbot, the better engineers can tune the AI to serve appropriate responses. Some chatbots are actively supervised meaning that a human operator watches over the actions of a group of bots, and is alerted to problems and can seamlessly step in. Others, like nib's alert the customer to the point when the 'bot has run out of ideas, and suggests the user calls an 0800 number. 

Sun Life of Canada's 'bot is a good example of the category - Link. 

UK: Jane Austen features on 'the new ten'

Jane Austen features on the new ten pound note issued by the Bank of England. Link. This is a polymer note, new for the UK, but with security features familiar to New Zealanders. It is groundbreaking in other ways, too. Jane Austen's presence helps with gender equality, less obviously (for most of us) there are a series of raised dots, a mark developed in conjunction with the Royal National Institute for the Blind which identify the note for blind users of money. 

Sovereign shifts to a bank-grade hybrid cloud in ten weeks

This article outlines the process Sovereign went through in 10 weeks and the other parties involved to develop their Quick Quote service currently running on their website.

The value in a balanced scorecard

I met an adviser once who was solely focused on meeting client needs. He helped everyone. He was a lovely man, desperately poor, and about to go broke. His ability to help people was being hindered by his inability to charge appropriately for his work. Not everybody needs this for free - but he was trapped, somehow, in the idea of working for nothing. 

I have met far more people who have undermined their reputation by a focus solely on the money. Gradually compromise after compromise is made to the point that, decades later, they are unrecognisable - they have become something they didn't plan to be, and people shy away from them. Their intent shows. Really, how much more money do you need? You can learn to feel good by giving too - and the prize for pro-bono work at the recent national adviser conference is a reminder. Put that in your life too.

Being focused on any single goal can undermine the value of a whole enterprise. That's why a balanced scorecard can be helpful. You can walk away from a deal and tick off all the things you achieved: balance, integrity, self-esteem, honesty. Sure, someone will do that deal, but maybe it's their turn, maybe I don't have to, and you don't have to either. After all, choosing how you spend your time is the essence of a good life. 

If We All Did These 4 Things, It Would Cut the Cancer Death Rate in Half

According to this article by Maria Masters we could significantly reduce our chances or getting cancer, and possibly reduce deaths from cancer by 50% by doing these four things.

Quality Product Research Update: V105

We have just uploaded QPRV105 onto Quotemonster and have also distributed it to all other subscribers. This version includes the following changes:

1. Momentum Life added for Life
2. AIA Business TPD, Trauma
3. Accuro update to Smartcare and Smartcare+
4. Income Protection review changes
5. All funeral providers updated
6. Review Funeral Cover item

Probably the most significant change is to income protection. You will note a narrowing of the range from the top to the bottom of income protection scores, due to reduction of the incidence rates for a series of secondary cover items.