Continuing our series of reviewing the most important items for Life products in this post we consider the Upgrade Policy Wordings item.
A commitment to upgrade policy wordings to include future enhancements is a relatively new commitment on the part of insurers. With life cover benefits you might feel that it's application is limited, but we disagree. Two items have contributed significantly to the value of life policies over the last twenty years: Special Events Increase in Cover options, and improvements to the Inflation Linking facilities. Improvements to these are just the kinds of improvement in the policy that the upgrade in policy wordings commitment ensures are passed on to clients.
- Seven life insurers offer the benefit receiving the full score for the item.
- Two others also say that it is their current practice, but the commitment is not included in their documents. We do not score them, as our ratings are fundamentally based on contract promises, not practices.
- Other insurers, predominantly 'direct' or bank-associated insurers do not offer the benefit. They also tend to have limited inflation options and do not offer special events increase in cover options.
We assign a 5% weighting to the value of this item. Looking back over the last few years there have been many improvements to cover, but we don't assign a higher rating because enhancements are nearly always available to healthier lives. They are of particular interest to lives that develop health problems after taking out their cover. Our weighting reflects factors
- a) the near-certainty of continued enhancements in terms,
- b) the expected duration of cover,
- and c) the likely proportion of clients with deteriorating health.
At present we rate only on the basis of the presence or absence of the benefit. There are, in fact, some variations in the terms and we may add in sub-items to deal with these variations. They apply to whether the upgrade operates if the client has been offered cover on sub-standard terms. If you want to double-check these take a look at the policy wording database in Quality Product Research at www.quotemonster.co.nz
We are conscious of the discussion around contract commitments to upgrade medical policies to the latest wordings. Medical insurance is different - unlike life cover where mortality is well-known and slowly improving, claims rates for medical insurance can be knocked about by a number of factors which are entirely outside the insurers control. Some ability to vary terms may be necessary to the effective functioning of these contracts. So the picture is more complicated. So be sure you check the research for medical products separately.
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