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.
Given the complexity of many insurance documents, including the presence of some dizzyingly difficult medical terms, it is surprising to discover that the greatest difference in documents could be these two little, easy, words "and" along with "or".
You see, at a casual glance a good definition can look a lot like a bad one. There is a long list of requirements, such as ECG changes, elevated enzyme levels, typical chest pain, and so on.
The tough definition links all the criteria up with 'and' you must demonstrate this, andthat, andthe other. That reduces claims. The easier definition is similar, but they let the client qualify under any of the criteria making each an alternative: you can claim if you were this, orthat, orthe other. Making it much easier to claim.
So next time you are looking at definitions with several criteria remember the difference between "and" policies and "or" policies can be quite a lot in terms of the claims paid.
PAA's chairman Bruce Cortesi had this to say to advisers in their latest newsletter:
As your Chairman, but also as an adviser, it has no doubt been a year of ‘big picture’ opportunities for change in this industry of ours. Change that will shape the future for consumers, our clients and ourselves on many fronts. As advisers we have had to endure many changes over the past twelve months, and then along comes the opportunity to create a new Representative Body!
Change we can deal with, but when the security and sense of belonging to a place one calls home – the PAA, is on the table for change then I understand that some of you may feel a little cautious. The passion for me to be part of the Working Group for Financial Advice New Zealand is how we can achieve better outcomes for our members, acknowledging the huge role you play in lives of many New Zealanders. You are the unsung hero that continue to focus on seeing that next person – giving advice and helping people make the right choices financially whether it’s in insurance, mortgage finance or investment.
Inter-organisational co-operation is at an all-time high. The IFA has published detailed guidelines for navigating the changes in the AFA Code and educational and competency requirements in co-operation with Professional IQ and the PAA.
One narrative runs like this. Few people expected John Key to resign. on the 12th a new leader will be elected. They may re-shuffle the cabinet team. Things may change - priorities may change. FAA review may not make the cut.
Another narrative runs like this: whatever happens the new leader will need a mixed bag of items on their to-do list. There are plenty of tough ones. Why not have one of the easier ones there too, so you can be confident of putting a few ticks in boxes? The FAA review carries on as expected.
A lot will depend on what happens in the next couple of weeks. To think only this morning I thought it would be quiet coming up to Christmas. But then again, even if the second narrative begins, the progression towards the next election can no longer be assumed, and suddenly and early election may come up to derail things.
Suddenly reform of financial advice looks less certain. Just for the record, I would be disappointed if that were the case.
The UK's Financial Conduct Authority has decided to try and make the UK annuity market a bit more competitive by forcing insurers to show competitor quotes for annuities. That is an extremely activist measure to take. The details from the FCA show frustration with low levels of comparison by consumers, and a concern for market failure. This is a subject we will expand on in the Quarterly Life Review we will publish to institutional subscribers in a fortnight. Link.
This article on Gen Re's website discusses recent trends for breast cancer diagnoses in Asia. 'Almost one in four cases of female breast cancer diagnoses around the world are in the Asia-Pacific region – the highest proportion of new cases in China (46%), Japan (14%) and Indonesia (12%). The global total of new cancer cases is projected to rise by 70% over the next two decades.1'
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.
An Auckland man was the first New Zealander to receive specialised robotic surgery at Southern Cross North Shore Hospital. The robotic procedure can be used to treat oral cancer, neck tumours and obstructive sleep apnea. Click here to read John's story.
'The corporate regulator has requested an audit of bank cross-selling practices after it was grilled in a parliamentary hearing on how it will address vertical integration issues among the major banks.' Read the full article here.
It's going to be 2017. Goodreturns has the details. The risk it doesn't happen at all has crept up a bit, still more likely to happen than not, but the risk of further delay pushing the draft till after the election is now no longer negligible.
Can a positive attitude help you live longer? Probably. This post from the American Psychological Association links to research which identifies various correlations between attitude and longevity. Not all of them obvious - such as the higher early death rate for more 'happy-go-lucky' types. Worth a read. They also link to planning for life span.
Financial services is a fantastic industry to work in. The work is varied, it is a growing sector, and the future looks bright. If you would like to prepare people you mentor, or even your children, for productive work in a world filled with scary stories about people being replaced by artificial intelligence, then you should at least encourage development in science, technology, engineering, and mathematics. Link.
Another high-level look at the insurtech opportunity - but this one is surprisingly readable. Although not all the developments are about insurance as such - some are just the application of tech in a way which bets on direct to consumer, for example, leaving the insurance offer essentially unchanged - the most interesting are the ones which hack away at core costs: ledger, identification, underwriting, claims. Link.
The New Zealand Society of Actuaries (NZSA) has elected Andrea Gluyas as its first female President, in its nearly 60 year history.
"I am delighted to be the President of the NZSA. It is an honour to lead the society", says Andrea.
"During my time as President I am keen to further develop our profession’s relationships with our key stakeholders and work closely with our sister organisation in Australia. I look forward to working with the NZSA Council, talented individuals who represent our profession with enthusiasm and insight”, she says.
"This is an exciting time for our profession. Actuaries play an important role in New Zealand's insurance industry, protecting our homes, assets and livelihoods. We are increasingly contributing to better outcomes in the public sector through our long-term world view and in-depth statistical analysis. I encourage young women and men with a talent for mathematics and an interest in our wider society to consider becoming an actuary”, she adds.
Andrea is a consulting actuary in PwC’s Wellington office. She has been Vice President of the society since 2014.
About the NZSA
The New Zealand Society of Actuaries (NZSA) is the professional body for actuaries practicing in New Zealand. Actuaries analyse the past to estimate outcomes and help manage risk in the future. Actuaries provide advice to many industries including healthcare, superannuation, insurance, banking and investments. Actuaries are becoming increasingly involved with non-financial sector organisations that aim to improve outcomes through data-driven insights. Learn more at www.actuaries.org.nz
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.