I have had meetings with four groups of financial advisers since the release of the MBIE FAA/FSP Review document. Faced with several dozen advisers on each occasion I asked a couple of questions:
How many of your have read the MBIE FAA/FSP review document?
In a room of 30 to 40 people just one or two said that they had read the document.
How many of you are planning to make a submission?
And it isn't just advisers. I have spoken with some Financial Service Providers and while a number were highly motivated and well-organised in making submissions (with useful things like good data, and real evidence of impact on customers) there were others that were 'keeping an eye on it,' which is the same as doing nothing.
But when we talked about the document there were plenty of views, much concern, and some truly great insights in every group, adviser, company, and consumer.
The document contemplates some very important issues. Much is at stake, we may not get another chance to affect how New Zealanders access financial products and quality financial advice for a very long time. Media and consumers like to complain about many of these, often at times when their complaints can have no effect whatsoever. So it seems weird that at a rare moment when participation could actually contribute positively few are making the effort.
This is a public service announcement: if you can't be bothered, then do not complain when changes are made that you may not like, or perhaps the reverse: that no changes are made and they should have been.
The New Zealand Herald writer Rebecca Savory reports:
"Increasing health insurance premiums are on the increase and it is a major issue, especially for the elderly. At the most extreme, a 73-year-old non-smoking couple with no pre-existing medical conditions could be paying more than $1000 per month in premiums, a 2014 Consumer NZ survey revealed."
Which is all true, on a nil excess with the addition of a specialists and tests benefit the couple could pay as much as suggested. The article then explains a number of ways in which the couple progressively reduced the cost, down to just $63 a month, and then opted for self-insurance. Which also looks quite sensible.
What I find difficult to understand is that this is described as 'Crisis of Health Insurance Affordability.' Presumably we don't consider health insurance a social necessity, otherwise we would extend the coverage offered in that system.
Recently we published links to an article on underinsurance. There were many good things in the article, which was good on cover levels but the illustration of premium as a percentage % of GDP figure is a bit misleading, and needs explaining further. The original article is at this blog post if you want to look it up.
The suspect comparison is this: "New Zealand spends 2.8 per cent of GDP on insurance, compared to the OECD average of 8.4 per cent."
Are kiwis spending only 25% of what they need to? No. We don't think so, and that's not what the sum insured comparisons suggest either. Don't get me wrong, we are spending too little, but not by that much.
You see there are some key differences between jurisdictions that make comparisons at the level of spending a bit hazardous. Some markets still buy a lot of whole of life and endowment products, which are classified as insurance, but contain big portions of investment as well. In many markets more is spent on more generous accident insurance than our centralised and skinny ACC scheme.The same has to be considered for medical insurance in any group in which the USA figures. Another factor may be differences because GDP per capita is so much higher in some markets, and that allows for higher spending on items such as financial contracts which can expand after basics like food, heat, and accommodation are paid for.
So we constructed a narrower peer group. By our calculations a more reasonable average excluding markets which are a lot richer and have different structures we get an average closer to 4% of GDP, it is 5% of GDP if the peer group is restricted to the industrialised world. Now our rate looks like it is about one third to one half lower than it should be. For most people in work the most obviously missing benefit, to return to the original article, is income protection.
It is a surprise and delight when you see a term like 'risk homeostasis' used in an article in a daily newspaper. The concept suggests that we all have a 'level of risk' at which we are comfortable and try to change our behaviour to stay at that point. That means taking actions to reduce risk when we perceive it to have risen. It also means that at times we take actions that increase risk when we feel safer - although increasing risk isn't usually the goal in itself, we perhaps just have more fun and permit that because we perceive risks as lower.
In this case the action explained is driver behaviour - link.
The $14.5 billion deal, which represents the largest transaction involving a financial services company from an individual African American entrepreneur or group of African American entrepreneurs, sees Magic Johnson Enterprises gain control of Equitrust, an enterprise that distributes fixed-rate and indexed annuities and life insurance through a national network of more than 23,800 independent agents.
Click here to read more. As an aside, should anyone from Equitrust be reading this, you should proof your Google adverts again.
Rob Stock writes for stuff.co.nz about genetic testing and insurance.
Cigna's new Cancer Cover insurance policy turned heads for its genetic testing clause as it specifies that no breast cancer claims will be paid for those who have tested positive for certain genetic mutation before taking out the policy.
Stock writes "Genetic testing and insurance are uneasy bedfellows, and there are fears that unless insurers are regulated, widespread genetic testing could result in a class of people whose DNA heritage leaves them unable to get insurance."
A study done in Canada used the post codes and median family incomes and then cross-referenced it with death certificates from 2004 to 2012. The study found that those living in poorer postal codes were more likely to die young. The study didn't explain why those living in richer areas lived longer but factors such as access to better medical care and living in cleaner environments are believed to contributing factors.
So then came the question should rich people pay less for life insurance? You can click here to read the full article, but there is another clue - they already do, because they are, typically, healthier. Also, consider that the correlation between wealth and health is common, but the direction of causation can work both ways. If you're wealthier you tend to seek out and obtain better care - because money is less of an obstacle. But also if you are unhealthier you tend to earn less and may have fewer relationships that create opportunities for wealth creation.