Here's a link to the Heart Foundations BMI calculator. Although BMI calculators abound this is good for New Zealand insurance advisers because it is a New Zealand site, and contains more relevant local information.
The most interesting change in the overall package is a new discount structure. An old discount structure mainly focused on income protection and mortgage protection benefits has been removed and a new variable discount structure of up to 12.5% has been implemented covering life plus Trauma, Income Protection, Health, and TPD. This probably provides more incentive to broaden the cover base for a client across a range of covers, and offers at least some discount to those that choose not to take Income Protection, which is a substantial majority, sadly.
Other pricing news
the policy fee (on which no commissionis paid) has been increased from $6.95 to $7.95.
the base rate table for Income Protection mortgage cover has changed
We will review the full impact of the pricing changes in the premium comparison tool for insurers. The pricing will be live on the 12th of October on Quotemonster.
New Product Names
AIA will be renaming product set to REAL before each product name. e.g. REAL Life Cover, REAL Trauma Cover. The Product naming will be launched 30 September and rolled out over time
New Health Product: REAL Health
AIA is launching a new Health Product called REAL Health
Premiums are calculated on a Yearly Renewable Term based on Age, Gender and Smoker status.
Individual premiums apply for each Life Assured, including for each child. A dependent Child will become subject to adult Premium rates on the next Policy anniversary date after they each age twenty one (21).
Pre-launch and Enhancement of Product: Loss of Earnings Premier
‘Premier Income Protection’ is being re-launched as ‘REAL Loss of Earnings Premier’
Product has been enhanced:
Enhanced pre and post disability income wordings
Added Optional Involuntary Redundancy benefit
Total and Permanent Disability Cover Personal
New to age 70 option
Quote either to age 65 or to age 70
from age 66 – 70 definition based on activities of daily living
New Special Events Increase option for Residential investment properties
Total and Permanent Disability Cover - Business
New to age 70 option
Quote either to age 65 or to age 70
from age 66– 70 definition based on activities of daily living
Life Cover – Level 15/80
Allow accelerated Trauma & TPD with Level 15/80 Life Cover.
Mortgage, Income and Rent Cover
Optional CPI added to all options
AV, Indemnity, LOE Premier • Optional involuntary redundancy benefit for IP AV, Indemnity, LOE Premier – New benefit
6mth benefit period
6mth stand down period from Policy Commencement Date
Payable after 30 days of unemployment
$2,500 or your sum assured whichever the lesser
Trauma - Personal
New inbuilt children’s trauma benefit
20% of Life assureds Sum Insured up to $50,000 whichever is the lesser.
Keep current optional benefit - $75,000 / flat fee
Change ‘Optional’ to ‘Top Up’
If top up benefit selected $75k is in addition to the in-built portion - maximum benefit of $125,000.
Added conversion option for children turning 21
All the product changes are being rated and will be reflected in AIA product ratings from 12 October.
Don Brash, former Governor of the Reserve Bank, has criticised the decision to have the RBNZ act as prudential supervisor for insurers:
“I for the life of me cannot see the logic of the RBNZ supervising insurance companies at all.”
His comments focused on the possible increase in moral hazard as government increases supervision requirements. He used the words 'taking responsibility' for insurers.
Our interactions with staff at RBNZ managing the regime has always found them to be very careful about exactly what they are, and are not, responsible for. One of the earliest actions I can recall was when I passed on details of a website which stated (erroneously) that the RBNZ acted as a backstop if an insurer goes broke. It was a matter of hours before the Bank contacted the website owner and got them to change the offending content.
You can read more at this link, in the interest.co.nz article by Jenée Tibshraeny
It has been a very busy time for product changes. In overview we have seen the following changes implemented in a rush in the last few weeks. Some only become effective later this month, but have been announced. Here is a summary list:
AIA - A whole range update including new names, products, features and new pricing
ANZ - Technical: the only significant change was the addition of triple vessel angioplasty to trauma
AMP - Additions to trauma including partial benefits increasing from 10% to 25% of sum insured
Fidelity - New level life product with extended terms, level riders (trauma and IP) and more
nib - Upgrades including guaranteed wording, pass-back, and non-Pharmac drugs at home
Sovereign - A series of small changes to TPD and Trauma announced over the last couple of months
We will profile in depth each of the changes and provide links to more details over the coming week.
The shift to new media is real. I asked in the office yesterday to get someone to name a media company. The first name was Netflix. This chart confirms the trend as a global shift:
In my house the shift to new media happened quite a while ago. When we did our renovations we built a media room downstairs and never put a TV in the lounge upstairs, we meant to, but never got around to it. That was the end of 'casual' TV watching. But we have two family PCs in the home office, the eldest child has a laptop, another has a Chromebook, and there is an Ipad knocking around as well. We all have smartphones. Now on-demand services are consumed in great preference to broadcast services, except when there is a really big game of rugby or cricket that we all want to watch!
This has an impact on how advertisers reach people. I should not, however, suggest that advertising is dying. It isn't: we receive many more advertising messages, and many that are better targeted than before, but it does take a bit more thought. Link.
On 16 October Jeff Watling from Fidelity Life will be playing 100 holes of golf in a single day to raise money for the LBC as part of a Fidelity Life team.
Every day six children and adults in New Zealand are diagnosed with a blood cancer like leukaemia, lymphoma and myeloma. LBC is the national charity dedicated to supporting patients and their families, this support that can last months or even years. LBC receives no government funding, so the Fidelity Life team has set a goal of trying to raise $5,000 to support this great cause.
If you would like to make a donation to their team then please click here.
A number of advisers have been asking us if Quality Product Research has a rating for ASB's Easy Life and Living Insurance. They do not, but it is likely that one will be added to the research database soon. In the meantime you are welcome to look at the policy document at this link. A key point to note is the pre-existing conditions exclusion.
If you have any comments or suggestions about rating products with pre-existing conditions exclusions please let us know - there are several on the market right now and the approach will need to be based on good principles in order to work across all the different types.
The FMA are seeking feedback on whether corporate vehicles set up by property developers to manage the costs associated with communal facilities in real property, should fall under the Financial Markets Conduct Act (2013) regime. Submissions are open until Friday 6 November 2015. Consultation paper and submission form can be found here.
For insurers underwriting is about two trade-offs:
More underwriting requirements always, to some extent, reduces sales
More underwriting can improve the risk performance of a book, but adds upfront cost
But what are the trade-offs for the client?
On the minus side more underwriting takes more time, and is essentially about helping the insurer decide whether to charge you more money, so discovering something the client did not know about has a direct effect on that equation
Of course, discovering a medical condition may allow for early treatment, management, and a better health outcome. For the healthy client the time and effort is pure waste on an individual basis. But maybe there is a gain as a member of the risk pool - perhaps cheaper premiums, or a gain to sustainability.
I have heard some advisers talk about how the underwriting process has forced doctors to open up to clients more. I have also had some make a case for more underwriting at outset reducing the scope for 'argument' at claim time. But such a case would be predicated on a combination of factors: an outwardly healthy client, with an unnoticed condition, that wouldn't result in the application being declined, that subsequently claims, and the condition has a bearing on the claim. Such a case could not be common.
We are interested in possible customer benefits from underwriting. Do write and let us know if you can suggest any.
Here is a grid containing the total deaths by cause for every country in the world.
You can enter 7 countries into it at one time by selecting from the list on the right. The Cause of Death Rankings are in the column to the far left. Follow the instructions to sort the Causes to match the countries you choose. Country Population will appear in red at the top when you enter it into the Grid.
Can insurers be technology leaders? Hat tip to Kate Dron for highlighting this article, from Actuarial Eye, which highlights the issue nicely by telling us how insurers, once technology leaders, are now scrambling to catch up with tech firms. Global insurers are worried especially that online businesses are threatening to push them back up the value chain while the tech giants grab loads of user data with which they can do almost anything.
There are several possible futures, here are two.
The first is the Google Car future scenario. Google invests masses of money into the technology that will be at the heart of the car in the future: the brain, the ability to self-drive, know location, find things, predict the requirements of its users, and protect the vehicle occupants. The car industry gets left with trying to do other things cheaper: bolting together the chassis, components, engine, and batteries. Who do you think gets to make most of the money out of such a proposition?
The second is the US Army scenario. A venerable institution (older than virtually every insurer, for example) which has invested in technology continually and has transformed itself. It has a vast fleet of flying robots, so you cannot really get more high-tech than that. But the core function is (depressingly) ancient.
If you want to think of the chances, then play this thought exercise: how many businesses can you think of in the first category? Now how many can you think of in the second category.
The challenge for the industry is to invest, and accept many experiments as a necessary price for the investments that pay off with surviving disruptive change.
The concept of a National Adviser Conference works well, we think, so we were delighted to hear that the IFA and PAA are planning another joint conference. But I am conscious that our view is focused on being able to reach and talk with a large group of advisers all at the same time. You might have different priorities. So please drop me a line if you have a strong opinion on whether there should or should not be a joint conference. Link.
Apparently eating an insect would be preferable to talking about insurance for 6% of 20 to 30 year-olds (in the United States). So this robo-advice site in Australia knows it has its work cut out for it. Link.
Rob Stock has this article attacking 'money for nothing' payments on trail commissions on products where the adviser no longer has the right to advise on a product. Link.
When this issue was first raised in Goodreturns last year I had several advisers approach me pointing out that the financial agreement between the investment or insurance company and the adviser was made years ago, and never included a stipulation that investment advice would be given. So, they say, 'what has the financial contract got to do with the current situation?'
Rob Stock suggests it might cut prices:
"The costs of insurance could drop if calls to end 'money-for-nothing' annual commission payments to financial advisers who are no longer providing advice or service to clients are successful."
But it is very unlikely.
The number of products in the category being discussed is tiny. To provide some context, the premium in the affected category is between $80 million and $110 million, but this pales by comparison with the 1.986 billion not affected (Public FSC summary statistics to 30 June 2015).
Some of those old products are on ancient computer systems which cost a lot to maintain - when costs are properly allocated they may be making losses. I doubt very much that there would be much movement in actual premiums even for the specific products, let alone insurance in general.
Via Insurance Business Online, apparently some actuaries have been busy contemplating the Rugby, and have come up with odds on an All Black win. Although my heart yearns to agree with them, my heads says that when we get into the late stages of the tournament anything can happen. Link.
The Economist has this on why nutritional supplements may be useless. Link. This is a timely reminder about the budget issue. Since so much spending is, in practice, discretionary the challenge is to prove relative value, against other items in the budget.