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Life Insurance Blog

A US based Life Insurance blog has a good selection of posts - here's an excerpt from just one of them:

Life insurance is too expensive.

FACT: There are options available to meet virtually any need and budget. Today, term life insurance costs about half as much as it did 10 years ago. A healthy 40-year old male may be able to purchase a $500,000 20-year level premium term life insurance policy for as little as $375 a year. That's a little more than a $1 a day.

I only need life insurance if I’m the primary breadwinner.

FACT: Even if you make less than your spouse or are a stay-at-home parent, you probably need life insurance. Secondary breadwinners and stay-at-home parents provide many valuable services that would be costly to replace if they were no longer able to provide them.

The coverage I have through my employer is enough.

FACT: Employers typically provide only a modest amount of coverage, and generally you can’t take it with you if you change jobs.

I don’t need life insurance after my kids have left the nest.

FACT: As you get older, proceeds from a life insurance policy can play an important role in protecting your spouse’s retirement security.

Forecast Drop in Adviser Numbers

Buried in a letter sent to Lianne Dalziel by a group of industry bodies (PAA, IFA, SIFA, and LBA) there was a suggestion that adviser numbers could fall by as much as 15% should regulation be too tough - specifically the concern was around disclosure of commissions.

I must confess to having mixed feelings about the need for commission disclosure. On the one hand it is quite unlike most other industries - where this is not required - and is not completely co-related (in pure term life or disability insurance) to the product as experienced by clients. Indeed a chart of commissions versus premium over the last 20 years would have seen the lines move apart, not in concert.

There is also a world of difference in how it is done. If the focus is upfront commission then the adviser that takes 30% p.a. would appear to be offering a better deal than an adviser that takes 100% up front, and a 5% trail - yet the former case actually carries a higher commission load for the client.

Yet if you switch to describing distribution margin you will be including all sorts of things entirely beyond the advisers control, and giving the client the wrong impression of the size of reward that may be affecting the advice they are being given.

But then again there are problems with different channels. If you  restrict disclosure to just what the seller receives, then how is that applied in, say, banking. The counter staff member may not receive any reward specific to the sale of the contract, or a very modest bonus - such as $50 per sale - yet the distribution margin on such products is routinely the same as for a product sold through an adviser.

What, meaningfully, will be communicated to the client? Would a legislative requirement that each client get's three quotes do more for consumer protection?

But also, this isn't going to be the disaster some think. As for driving people out of the industry, if anything will do it, it will be a requirement for two year's study - not disclosure of commissions - that will push people out - and maybe it should.

However, procedurally, this is going to be an issue for advisers. It will come. So the rememdy is disclose and discuss - and focus on value. It will interest clients that "direct" insurance often costs more than supposedly "indirect plus advice" so it would be best to make sure the advice is worth something.

Reverse Mortgage Issues

In Australia eagle eyed planners have found a way reverse mortgages can - if used thoughtlessly - create tax problems for people using them to lend money to their children. Link.

It is conceivable that similar issues can be created here - if you borrow a large sum to invest, thereby creating a regular income stream, you can increase your income, go up a tax bracket, and lose some welfare benefits as a consequence. However, a moment's thought can eliminate the problem - just don't borrow to invest like that, only draw the funds as required.

Mortgage Brokers Look for Ways to Maintain their Income

Commission cuts, a shrinking market as funding dries up, and a slowing property market, have all put pressure on mortgage broker's income. That's here in New Zealand. It's the same in the UK. (Link). The answers are similar in both places - related services: such as insurance and conveyancing.

It's time all you mortgage brokers learned how to sell general insurance, life insurance, and got more disciplined with packaging your service and managing referral processes.