I am both a data nerd and like to keep fit. So a fitness tracker - in my case a Fitbit - was kind of inevitable. I have worn one for about two years, and love it. But apparently the typical duration of use is just three months. Some people tire of them - just like they tire of going to the gym. Some people like the data for a while, and return to using the devices again later. Here is an interesting article from Ross Campbell, from Gen Re's Life/Health Chief Underwriter, Research & Development about how the number of steps taken each day may affect mortality. One day it would be nice if we could use all the health data that already exists - held by our government, and on services such as fitbit - so that we could automate the process of full underwriting.
Jenée Tibshraeny at interest.co.nz has written an excellent article on the issue of insurers underwriting people with mental health conditions. I think Tibshraeny does a great job of explaining the consumer position - even advocating for it - while explaining the industry position too.
There is a gap. Some people with mental health conditions may not be treated fairly in the underwriting process, and recent events are, maybe, changing the environment, and insurers are slow to change. They must be, insurers need good data before changing their views, or else they may be exposed to lots of new claims. In Australia there is a problem with income protection, and mental illness is contributing to that. For a complex issue to get covered in this way is both important and rare. I was glad to see it done so well. You can read the article at this link.
Stephen Potter, head of underwriting at Fidelity Life, did a great job of explaining the underwriting process, and in so doing, explaining how it is really good to have an adviser involved.
Everyone's doing it. Apart from the insurance industry... On either side of politics, from comics to consumer companies, from Donald Trump to JK Rowling. People are using social media to engage with their audiences. Even our stodgy old political parties use social media extensively. Even more critically: they respond!
If I post a comment on a twitter stream about Air New Zealand, or Typepad, or Orlando Airport, they respond - usually within hours, often within minutes. I mention those three, because I have, and they did. Good on them all.
But the insurance industry, so wrapped up in itself, complaining about how regulators and ordinary folks don't understand, and yet - when consumers offer to engage on their terms, insurers are nowhere to be found. Take Susan Edmunds' recent article about non-disclosure. Look at the comments section and you'll see lots of this:
Insurers don't pay claims and don't want to
Insurers don't refund premium payments on avoided policies
Insurers don't ask clearly for the information that they want
Insurers don't take into account forgetfulness
Insurers don't take into account information already provided
Insurers don't take into account information they collect from your GP, they would rather hold onto it as a reason to deny a claim later
All of these are demonstrably false, wrong, or not fair on the insurance industry. Examples could be given, links provided to statistics, financial reports, and even videos of claimants posted (like the excellent Mind-the-gap series by the FSC). Why is the industry choosing to pass up this opportunity to engage with their audience? There are few exceptions: nib's CEO Rob Hennin has directly commented on LinkedIn posts, and in other media, Partners Life staff have directly commented on Goodreturns posts.
'According to the Insurance and Financial Services Ombudsman New Zealand needs a law change to stop people "ruining their lives" by not disclosing relevant information to their insurers. It is believed that many cases of a declined claim the insurance had been bought online and that insurers should be doing more to highlight to consumers what is required.'
My first thought was that the industry appears to be moving in the opposite direction. The use of more non-underwritten product makes claim decline for an existing medical condition much more certain than it would be for a fully underwritten product - even with the risks of non disclosure.
On the other hand, an adviser friend felt that more non-underwritten product was helpful. A person with a health condition that they did not wish to disclose (sometimes out of fear, forgetfulness, or embarrassment) that would be excluded would be focused on that by the exclusions explanation, instead of thinking that they could 'get away with it.
Either outcome depends heavily on how advisers discuss the duty of disclosure in fully-underwritten cases and how salespeople use non-underwritten products in comparison. Given the outcome is so predicated on likely practice I would be interested to hear from advisers on the subject. What do you think? What have you found from clients that have been sold non-underwritten product?
This article from LSM Insurance discusses the impact of genetic testing on Life Insurance. Some 'hard testers' feel that insurers should be able to use any information to form a view on underwriting. Others are concerned that genetic testing may be able to pick up future problems so early that it will deny coverage to many people. In the United States this problem is more vexed than it is here: because state by state the available minimum safety net may vary, and back up coverage, such as Medicaid, is dependent on income and other factors. In New Zealand we could opt for an approach which allows a lot of genetic testing because of the more extensive state safety net that exists for everyone - hopefully that would allow prices to fall.
Given the complexity of many insurance documents, including the presence of some dizzyingly difficult medical terms, it is surprising to discover that the greatest difference in documents could be these two little, easy, words "and" along with "or".
You see, at a casual glance a good definition can look a lot like a bad one. There is a long list of requirements, such as ECG changes, elevated enzyme levels, typical chest pain, and so on.
The tough definition links all the criteria up with 'and' you must demonstrate this, andthat, andthe other. That reduces claims. The easier definition is similar, but they let the client qualify under any of the criteria making each an alternative: you can claim if you were this, orthat, orthe other. Making it much easier to claim.
So next time you are looking at definitions with several criteria remember the difference between "and" policies and "or" policies can be quite a lot in terms of the claims paid.
Advice has a number of contributors to claim outcomes. Courtesy of ASIC, we now have data to quantify exactly how those help consumers at claim time compared to non-advised insurance. The data is in section 184 of the ASIC report - page 53. This is how it breaks down, by claim outcome:
Non-advised decline rate is 12%, compared to just 7% for advised channel claims. That is a huge variation: you are almost 70% more likely to have a claim declined in a non-advised channel product. Why is that? The chances are, its the product. Advisers do not sell the types of products that are commonly sold in non-advised channels. The differences will be mainly in pre-existing conditions exclusions and the absence of underwriting in many of these products. This is a valuable indication of the size of penalty that Quality Product Research Limited should consider when rating non-underwritten products. This may also be influenced by the adviser reviewing the potential claim, and pointing out when it really shouldn't be made.
Non-advised claim withdrawal rate is 11%, compared to 12% for advised channel claims. That gap is again bigger than it looks. The claims withdrawal rate could mean quite different things. An adviser may recommend putting in a marginal claim and withdraw it when it becomes obvious that it will not succeed. Or a client might make a claim and be talked out of it by an adviser - especially if the nature of the claim meant that it was, in fact, misrepresentation or fraud. We don't know, and it might be good to talk about this.
Non-advised partial claim acceptance is just 1%, compared to 3% for advised channel claims. This gap is again bigger than it looks. It will reflect a mix of things: the first is again product design. Advisers are more likely to choose complicated but comprehensive products which include partial payments. Non-advised channels, in their quest for simplicity, tend not to have these features. Another possibility is that advisers can advocate for payments for their clients under sections of their complex wordings that clients themselves might overlook even if they buy a complex product from a non-advised channel. Lastly advisers may be twisting insurance company arms: a client on their own is just one client, an adviser represents a large number of current and future clients too, which may prompt a little more flexibility in marginal cases.
Both channels have the same level of 'undetermined or unspecified' outcomes - of 3%.
That leaves the 'Accepted in Full' category of claims at 74% for non-advised and 76% for advised channels.
Of course, these are only averages, for some companies the decline rates are higher, and some much higher. There also appears to be an interesting effect on the level of disputes, but we will write on that later.
Lastly it should be pointed out that the claim acceptance rate on insurance you don't buy is always 0%. I am a great advocate for insurance and feel that non-advised cover fills an important gap for many people. 74% full claim success rate is a very, very, great deal better bet than not buying cover at all.
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.