moneyblog

How Japan can cope with the 100-year-life society

This article from The Economist discusses the issues facing Japan as they expect over half of Japanese babies are expected to live to 100. The impact of lengthening life can be seen all around us - in 1800 for a person to live to 50 was rare - the world over. Today, it happens more than not, even in some of the poorest places on earth. The changes to our industry appear not to be obvious, but that is probably because the changes are slow. Once, the very idea of trauma insurance, or disability income insurance, were seen as revolutionary. Today our worry is that the allocation of premium to life insurance is a problem - that money should really be spent on living benefits. 

Fair Go: Invercargill farmer refused trauma insurance payout after going blind in one eye

So I am highlighting a case brought up by Fair Go - regular readers will know that I have disagreed with their treatment of insurance stories in the past. Having said that, addressing the higher level issues of product design and sales process, the case Fair Go draw attention to highlights several issues arising from the gradual extension of trauma / critical illness over the years.

The first is complexity - it is not realistic to assume that the average client will read or understand the policy document for Trauma cover. So when they are faced with a possible claimable event, that is most likely to be the occasion on which they pay attention and consider the detail of the definition. Will they be surprised when they read it? Will they even be able to make sense of it. I started checking on the details of this case, which tool me about 15 minutes. But I have some advantages: I already possessed the policy document in an easily searchable format (a PDF) and have familiarity with the industry. The process required working through multiple wordings (AMP uses the booklet format, which includes many wordings for different covers the client may or may not have) and even within the correct wording, I had to refer to different sections to work out the clauses that applied.

The second is disclosure - how can you adequately explain this stuff to the client? Without working through every disorder, which no-one has the patience for, clients and advisers fall back on an assumption of equity. How can we properly calibrate that assumption so that meaningful cover can be offered at reasonable cost. 

 

Australia: limits on genetic test disclosure

Sally Loane, of the Australian Financial Services Council, talked about the Australian Insurance Sector position on genetic tests with RiskInfo - link. Although the threshold at which disclosure is required is quite low, there is something to consider in this approach. 

A great TPD claim story

A superb video about a successful TPD claimant, who was a drainlayer. I hear a lot that people say TPD doesn't pay. I think that there is a lot of difficulty getting TPD claims paid - both for insurers and clients. Insurers do have to make sure of the eligibility for claim in fairness to other policy holders. The client has to keep going through a barrage of tests and assessments over a long period of time - that can sometimes feel like they will be endless. All that suggests that the role of a professional adviser is crucial. when it works well, it works like this video. Something Anand Srinivasan, of Brisk Insurance, can be proud of.

General Insurance: RBNZ looks long-term and asks insurers about climate risks

The RBNZ has revealed plans to talk with insurers about climate risks. That is a good idea. Commencing a conversation about climate risks may enable pricing signals to more smoothly contribute to changes in policy necessary to avert climate change, and manage its effects. Dealing with this in a planned way helps avoid consumers and companies getting shocked: like suddenly having flood coverage removed for properties in low-lying areas.

Recent changes to Fidelity Life's Application Forms

Fidelity Life have recently made changes to four application forms:

1. Risk application form
2. Short application form
3. Mortgage Protector application form
4. Fidelity Life/nib multiple application form

These are now all available on Quotemonster to research subscribers. 

FMA on Bank Incentive Schemes

The FMA's report on bank incentive schemes repeats the statement that this has wider application for financial services companies wishing to demonstrate effective conduct controls:

While this report and its expectations apply to banks, many of the issues are relevant to other types of financial services firms. We recommend that all financial services
firms consider this review, the issues raised, and how they relate to their business.

The review as a whole is well worth reading, especially the section on controls (pages 13 through 20, roughly), which provides starting points for designing approaches to remuneration that can create a more customer focused set of outcomes. That is what the FMA wants, and has set a deadline for it being achieved. At the end of the report, they state this:

We expect banks to implement changes to their incentive schemes no later than the first performance year beginning after 30 September 2019. In March 2019 we will ask all banks how they will meet our expectations regarding incentives, and we will report on their responses. Any bank that does not, by that date, commit to removing incentives linked to sales measures for salespeople and their managers will be required to explain how they will strengthen their controls sufficiently to address the risks of poor conduct that arise with such incentives.

 You can find the report here.

Better conduct, better customer outcomes

Here you can find the November update from the FMA explaining the busy start they have had to the month.

Fraud Awareness Week 2018

This week is Fraud Awareness Week. This years theme is 'Stop and think. Is this for real?'

Click here for more details on how to recognise a scam, what to do about it, and how to get help. 

Obesity and cancer

Obesity is a factor in cancer, this article explains how that works - and the changes necessary to reduce risks. My favourite part of the article is where they explains the action of a drug trial:

Prof Lydia Lynch said: "A compound that can block the fat uptake by natural killer cells might help.

"We tried it in the lab and found it allowed them to kill again.

"But arguably a better way would be to lose some weight - because that is healthier for you anyway."

You mean a better diet and more exercise? Dammit, I was hoping for a pill!

Southern Cross reveals some of its most unusual insurance claims of the year

This article from NZ Herald outlines some of the strangest travel insurance claims Southern Cross have received over the last six months.

Suncorp NZ deploys Nutanix to support virtual desktop flexibility

Suncorp NZ have launched a new software allowing 700 virtual desktops to enable more flexibility to employees. Click here to read more. 

Advisers: please help

This is a plea for help. The New Zealand Dental Insurance Society has declined to provide a policy document for Quality Product Research Limited to review. Can any of you assist in providing a current one, as we would like to include their product in our business insurance comparison table. Please drop me an email if you can.

Geoff Annals on conduct obligations

Geoff Annals, CEO of Accuro, the health insurer, has made the clearest statement yet by any insurer on a shared view of responsibility for client outcomes.Illustrated in this quote, by talking about servicing requirements:

“Our remuneration should reflect that. That’s one of the things insurers can be criticised for. If we remunerate without requiring evidence that the service we expect has been delivered, we should be in the gun, too."

or a goodreturns article, at this link.

Previously companies have tended to act in a way which suggested a very clear demarcation between the insurer and the adviser. That view was a split between the client experience between product and service performance (provided by the insurer) and advice (provided by the adviser).

The view is effectively a recognition of the various legal contracts that underpin the commercial arrangements. Clients have a contract with the insurer, the insurer is not involved in the arrangement that the client may or may not have with the adviser. The adviser's role with the insurer is defined in their agency agreement. This split is widely reflected in the split in law, but it is not as clear-cut as it is sometimes represented. Whether insurers like it or not, advisers are their agent when it comes to the point of application. In other respects the boundaries may be blurred as well, such as when an adviser makes a mistake in good faith, and the insurer handles resolution - cancelling contracts from inception and returning monies paid, for example.

The discussion about conduct is drawing some areas previously dealt with by assumptions and expectations into the daylight, and is perhaps demanding that they should be made explicit. Perhaps there should be explicit service obligations. If a significant portion of the client's experience of a product is based on a service the adviser will provide, then maybe the adviser and the insurer should agree what that service looks like.

The potential upside for advisers here is clarity in their centrality of their role to the operation of the product. On the flip side of that, insurers may wish to operate two channels - one where they are happy with transactional introductions, and another where they want a genuine partnership with advisers.

Professional IQ: When Clients Don't Have to Disclose

Professional IQ are holding a webinar titled 'Non-disclosure: when clients don't have to disclose'. They will look at the limited instances when an insured does not have to disclose information to an insurer. Using case studies from complaints to the Insurance & Financial Services Ombudsman Scheme ("IFSO Scheme"). Click here to read more or to register. 

Loss of funeral insurance grants adding to the burden on loved ones left behind

Southern Cross have recently announced to over 800,000 policy holders the removal of a $2,500 funeral allowance from policies effective 10 December. In this article funeral directors explain the huge burden that could have on families when it comes to funding a loved ones funeral stating "a lot of people tended to underestimate the cost of a funeral and staff also helped lower-income families to apply for the funeral grant provided by Work and Income NZ - a total of $2058.52.

The Southern Cross changes continue to be raised by advisers that talk with me. The funeral grant is a modest benefit, but others have caused more concern with the limits on treatments for skin damage being an example raised several times in the last few weeks. We shall be meeting with advisers and asking insurers about changes in the way Quality Product Research scores medical insurance. 

Latest Goodreturns Article - can you comply with the Code?

My latest piece on goodreturns is available at this link.

Contrasting Royal Commission fall-out

In Australia ASIC has called for general insurance commissions to be banned. I think this is likely to have unintended consequences. It might well kill off sales of general insurance at car-yards and over the phone, where most of the problems have been discovered. But it may also damage the business model of third-party general insurance advisers that have been the only real advocates for consumers, and quality, in a market dominated by just a couple of large companies. 

Meanwhile, back in New Zealand, the New Zealand Herald wondered whether the backlash against banks might damage the offer of services to New Zealanders. In a piece which brought the first hint of balance from mainstream media to the debate about about conduct regulation. Link.

My worry is that a financial services sector where the only advice you could get is fee-only, would leave the mass market without access to the ability to compare and consider higher quality alternatives without having to find a couple of thousand dollars. 

Quotemonster upgrade beta now live

Quotemonster has gone through a major upgrade. You can try out the new site, and all your quotes and research on either site are accessible on both. The new layout may take a little getting used to - but it allows these cool new features:

• Much better display on mobile devices - using an iPad, tablet or even a phone you will be able to quote and compare on the run
• Needs analysis shows Mortgage Cover - showing Income Protection and Mortgage protection as split benefits
• New settings section for Advicemonster users so you can set your own defaults for cover calculations
• Enhanced Head to Head analysis with the addition of policy wording linked to items  
• Quicker saving functions
• New options for default and "this quote" occupation settings

But don’t panic. We will be running both platforms together so you can choose to continue to use the old platform in the meantime. To see the new version simply click on  icon 'New Site' in the orange bar at the top and it will open in the new tab (as shown in picture below).




Please do try the new version and let us know what you think. We have made it easy to switch between them as client details will appear on both platforms when saved.

The first 1,000 are the most difficult

According to Seth Godin in this blog post writing the first 1,000 blog post is the most difficult part. But the are such a learning experience. Many mistakes, some I blush to think about. But learning without failure just doesn't really happen. For all those that have contributed, especially those brave enough to criticise, and kind enough to do that well, I continue to be grateful. So if you want to give blogging a go, feel free to call and we can catch up and talk about it. If you have a group of advisers that wants to learn about content creation, I would be delighted to run a workshop on the subject - free of charge in either Auckland, Wellington, or Christchurch.