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.
In this piece at RiskInfo.com.au Sue Laing is quoted as highlighting the dangers of publishing claim acceptance rates. Here are some examples of her concerns:
The underlying reason for Laing’s concern is that a ‘leader-board’ of decline rates will create competition between insurers to avoid rejecting claims in order to achieve a higher placing. She believes this is a dangerous precedent that would lead to an unsustainable pricing structure that could only be addressed by price hikes.
It is possible for such data to be misinterpreted. ASIC's report was balanced and positive for the industry, only noting some concerns with some types of direct insurance and the high variability in TPD payment rates, but the media has held it out as something far worse in some coverage in Australia.
Laing proceeds to list problems with the data as issues as well:
She also questions whether the industry even has the capacity to report consistent claims information, saying claims data reported by insurers is “…ridiculously inconsistent.” Laing adds, “Even claims causes, which most of the life insurance world globally reports based on an international code but our industry doesn’t, are impossible to properly collate. The risk store has experienced that first hand for 10 years as we have struggled to gather and publish annual industry claims paid and causes statistics to the best quality we can muster from what we are given.”
Laing has a point, but I think secrecy is the wrong answer.
I know the claims data is poor. Plenty of evidence supports scepticism about the numbers. Take the calls to Sovereign after the Christchurch earthquakes for example, they were just confused customers, not real claims. But what about someone who thinks they have IP and only have TPD, is that a claim? Probably not. Now what about someone who thinks they might qualify for a partial payment under their TPD but just misses out? Probably is a claim. And so on. But the answer to this complexity isn't to allow claim payment rates to remain in the shadows. The answer is to work towards industry standards of record-keeping and reporting.
When Laing points out that most of the life insurance world globally reports based on an international code, but Australia doesn't... the first question in my mind is: why not? There may be a good answer, but claims rates look like exactly the kind of data we should be working on.
Finally, I think that focusing on one measure alone is always a bad idea: just price, just product quality scores, or just financial stability, or just claims data, or even just customer service scores. People need to take a look at the lot and make a call. Some won't want to - too hard! - they will be better off using a professional adviser. Others will be happy to rate trade-offs and consider options just like they do with other complex financial purchases with multi-year downstream effects (like buying a house).
Are you a high user on Quotemonster? You may want to consider the following tips if you use Quotemonster to do all your quotes:
Think about saving your quotes elsewhere. Quotemonster is not designed as a CRM and therefore we do drop old quotes off the system to allow for the site to continue running a good speed for advisers. Be sure to save copies of the Quotemonster reports you create in a CRM, or online storage such as Google Drive, OneDrive, iCloud, or Dropbox, a hard drive or another source of external storage.
Be sure to regularly check your 'Settings' button to ensure you are quoting the products you think you are. Occasionally we will add new products or an enhanced version of an existing product which will also be found in the 'Settings'
Talk to us - feel free to drop us a line or give us a call on (09) 480 6071. If you have any feedback or would like to ask questions we would love to hear from you.
Alan Rafe, CEO of Quality Product Research Limited (disclosure: I own half of that business) recently produced a discussion document and talk comparing advised+underwriting and non-advised/no-underwriting processes. You can get the full presentation below.
Quality Product Research are working on a new info-graphic, which is all about the scoring methodology. This part of the new guide covers the use of external experts to help arrive at reasonable value-based weightings:
Here at Quotemonster we get assistance in reviewing contracts from a number of different sources:
Insurance companies and reinsurers: can all access the data on which we make our assessments and provide feedback.
Actuaries: help to inform our view around relative risks and incidence weightings for different items and sub-items.
Claims managers and underwriting managers: help us to get different perspectives on the actual use and value of different features.
Advisers: give us feedback on recent claims experience and how their clients are actually using the insurance policies we rate.
We also stay in touch with people at dispute resolution bodies, regulatory bodies, news organisations, academia, and consumer groups to get a wide range of views and input.
More details If you ever want more detail about the ratings for any item or insurance policy in our database please contact us directly and we can usually refer you to more detailed information on our blog, policy library (including hundreds of policies no longer on sale), and details from our database.
Quotemonster already helps more than 3,000 advisers to do price comparisons on the most popular insurance products in the market - completely free.
Out of them more than 1,300 advisers have also discovered the power of insurance product research to help them identify the meaningful differences in product, personalised to each individual client based on their age, gender, occupation, and product selection choices.
But just a couple of hundred advisers are “power users” sucking every possible advantage out of the system. These are the extra services that they use to build the best insurance report possible. Just because, here is a run down of all the cool things Quality Product Research does now.
Quote the market We provide premiums for 10 companies.
Research We research 28 companies and over 70 products
Head to head – a more detailed comparison of just two products ‘head-to-head’ showing the differences between them to help your client make an informed choice.
Underwriting requirements – based on your client’s choice of products and sums insured we do the hard work of picking through the non-medical requirements and produce a report which shows exactly what paperwork, tests, and exams are required. A huge time-saver. Really useful for clients scared of needles. Eliminates ‘you didn’t tell me that’ objections.
Statistics that help you sell: everyone can add a personalised client risks report which tells your clients their working life risk of death, total disability, temporary disability, and trauma.
Recommended product premium choices: if you have chosen a specific company to recommend but you don’t know whether the client would prefer a wait period of 4, 8, 13, or 26 weeks, or perhaps an excess amount on their medical of nil, $250, $500, $1,000, or more? This makes it easy: it includes a table of all the different premiums for each option at the end of your price comparison report. Saves lots of re-quoting.
Needs analysis – enables you to develop a scope of service, set objectives, record what advice your client wants, capture basic financial information, and calculate an ideal cover package – in minutes, not hours, and adds all that data to the comparison report. Automatically sends the values to the quote saving more time.
Historical policy documents are searchable by date, company name, and type.
We have led a campaign to shift perceptions from a 'ranking' mentality to a value-based comparison approach which allows a genuine fit for purpose discussion to be had.
Ranking sounds great. Until it gets silly. Let me give you two examples:
Being the tenth best life insurance contract sounds dreadful. But what if your score is 91% of the best contract? All these contracts will pay out if you die. All of them would beat a policy with a pre-existing conditions exclusion and a host of built-in hazardous occupation and pastime exclusions. Consumers regularly buy products lacking 9% of the features of the best product in class. I always buy the latest smart-phones, my middle child is perfectly happy with an older phone. He openly mocks me for spending so much when he could buy three of his phones for the price of one of mine. He prefers to save his money for a better PC. What I get for the extra money, he doesn't care about. Tell him that his phone is only about the tenth or even 20th best he could buy and he doesn't care.
Then take the opposite case. Buying the second best product in a set of five sounds not bad at all. Until you find out that it has only 50% of the features of the best and yet costs almost the same price. This happens too. That's why I believe that value-based research makes a lot more sense. Value-based research means that you compare the meaningful differences between products bearing in mind their actual value to the consumer. It also means you have to give up on two bad habits:
You have to stop giving loads of points for microscopic benefits, and you have to stop ranking. Because both those bad habits hide how valuable the differences are to consumers.
This is the sixth in our series on building excellent insurance financial reports using Quotemonster and Quality Product Research.
We believe in great financial advice. For financial advice to be good we must be solving a problem or meeting a need that a client has. One of the best financial advisers in the world recently said that a really powerful question to ask a client is ‘what do you want?’ When advisers don’t ask it we can run into all sorts of trouble – making assumptions about what a client wants can lead to giving poor advice. But sometimes the client simply does not know what they want and in order to answer the question they need to choose between some options. That can help get the conversation going.
Documenting what the client wants is also a crucial part of meeting your compliance obligations as an adviser – as you can only prove that your advice is good for the client if you have agreed a goal with the client. So that’s why our needs analysis tool starts by asking some questions to help you define the scope.
To start a needs analysis, you need to enter some client details as if you were about to do a quote. Once you have completed this first page of information click next. Instead of choosing some benefits and sums insured move the mouse to the top of the screen and click the ‘needs crunching’ button.
There are four steps to completing the needs analysis and using the results to create a quote – this message is all about the first step – scope and priorities. The main types of personal insurance are listed, with an explanation to help clients that may not understand clearly what they are. Then there are some typical limitations and exclusions shown to help clients understand what won’t be covered. Then you ask your client to choose a priority for each type of cover.
This helps focus your solution on what the client most wants. Priorities will help a lot later when you decide to reduce some cover in order to meet the client’s budget. Recording it quickly here can help out in the event of any disagreement at claim time – did the client really believe they were covered for income protection? Not if they decided to make income protection ‘less important’ and remove the cover due to budget considerations. Capturing that information here takes just seconds, contributes to a thorough job, and can help you meet your compliance obligations.
This page can also help you sell more by introducing your client to a wider range of insurance benefits – particularly the ‘living’ benefits of medical, income protection, and trauma cover.
The lower part of the page deals with the services you will not be providing. This makes it clear to the client that you will either refer them to another adviser for further help or that you have a hard limit on what you do: perhaps you do not provide advice on KiwiSaver, or you need to make it clear that you do not review home, car, and contents insurance. It is recorded simply here.
The next part in the series looks at defining the work you agree to do for your client. It is a real showcase for what you can do with full personalised advice.