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David Mayhew Resources

We welcome the appointment of the new commissioner and provide a couple of links for readers eager to learn more:

Herbert Smith Profile here.

Their promotional paper on the future of financial services regulation Link.

PR from appointment to FSA in 2001 Link

Herald announcement Link

There are countless references to cases David Mayhew has been involved in and those paranoid about his supposed 'jackboots' might also ponder that he has worked both sides of the fence.


Lead Generation

This is going to end up being 'Monday fun' if I am not a little more diligent - but I do prioritise work above blogging (well, most of the time).

Enjoy - apologies to Italians, I could have as easily done the names for any other nationality.

'Bless me Father, for I have sinned.I have been with a loose girl'.
The priest asks, 'Is that you, little Joey Pagano ?'
'Yes, Father, it is.'
'And who was the girl you were with?'
'I can't tell you, Father. I don't want to ruin her reputation'.
"Well, Joey, I'm sure to find out her name sooner or laterso you may as well tell me now..
 
Was it Tina Minetti?'
'I cannot say.'
'Was it Teresa Mazzarelli?'
'I'll never tell.'
'Was it Nina Capelli?'
'I'm sorry, but I cannot name her.'
'Was it Cathy Piriano?'
'My lips are sealed.'
'Was it Rosa DiAngelo, then?'
'Please, Father, I cannot tell you.'
The priest sighs in frustration.
'You're very tight lipped, and I admire that. But you've sinned and have to atone.
You cannot be an altar boy now for 4 months. Now you go and behave yourself.'
Joey walks back to his pew,and his friend Franco slides over and whispers,
'What'd you get?'
'Four months vacation and five good leads.'

Hat tip: Tony de Witt at TOWER.


Confidence in Financial Institutions

Along with other industry body heads, our compliance guru Rob Dowler attended a presentation at the Retirement Commission in Wellington yesterday on the inaugural release of the RaboPlus financial confidence survey results. I show below links to various media reports on the survey. This survey will be conducted six monthly going forward. Media reports include:

Stuff

NBR

Scoop

Scoop2


Language Counts - Ways to Improve Insurance Applications

One of the better insurance applications is at my side as I write this. Right at the top of the starting page is a box which is meant to placate the actuaries and underwriters. It's headed up "Your duty of disclosure". It proceeds to tell people about how important it is to tell the truth, the whole truth, and nothing but the truth. This is one of the best examples I have seen.

But put on another pair of glasses:It's actually rubbish.

We have lost our way. MSWord calculates the Flesch reading ease level of the statement at 46.5. (out of 100, where a higher score is better). They reckon 60 would be a minimum for a standard document. But this isn't a standard document. It's a statement upon which everything that follows is built. Here is a set of words that I suggest the average person, completing an insurance application would not completely understand that appear in most disclosure declarations:

Disclosure

Material

Relevant

Substantially

Avoided

Forfeited

Premiums

You see, Diana Crossan is right. The word disclosure is part of the problem, not the solution. How about "tell the truth, and tell us everything about your health, why you are taking out this insurance, and anything else you think we might need to know"

"Material" to the dim might mean cloth, but even with a smidgeon of context most readers are not going to understand  the full implication, which could so easily be said: "anything in your medical or family history that might affect your health or how long you are going to live". 

The same goes for "Relevant" I am afraid - we are asking the client now to judge what is relevant or material. These are decisions we don't trust our underwriters with until after years of training. We should not ask this of a client, we should tell them as plainly as we can what we think is relevant.

Substantially - sorry, same goes. Also, this speaks of the weasily nature which is the antithesis of the straightforward 'telling the truth'. Are we inviting the client to tell us things that are a little bit untrue, so long as they are substantially true?

No casual non-industry person understands "Avoided" without tuition. What about "we won't have to pay" and instead of "forfeited" and "premiums" have "you will lose all the money you paid".

Language counts.

This warning was subtitled "Please read carefully" they might as well have added "with a dictionary nearby" and "while referring to an online database of insurance jargon".

Here's a suggestion:

"WARNING!

If you want your insurance to pay out at claim time you need to make sure you tell us everything we need to know in this form. We need to know anything that could affect your health, going back as far as you can remember. We need to know about your habits and your family history. We need to know about your work and habits. If you are in any doubt, put it on the form - there is space at the back for you to write more if it does not fit into the form. Even if you tell the adviser about something, make sure you also put it in the form. If you remember something you think you should have told us later on then write, phone, or email it to us. If you don't tell us something that could affect your health, how long you will live, or which might increase your chances of disability, then we may not pay out when you come to make a claim. You may lose all your money. Remember - we want to insure you, and we want to make sure the insurance pays out if you claim, so please complete the form fully."

It's got a Flesch reading ease of 79.8 and I bet it saves more time, money, and trouble, than all the other disclosure statements you find out there.


Lower Risk in 09 - Crash Test

You can watch a video of a crash between a 59 Chevy Bel Air and a 2009 Chevrolet Malibu in this article. Although I am a fan of the look and feel of many older cars I have three engineers in the family and they all pretty much agree with Jeremy Clarkson that the best car in the world is likely to be a modern one - for many reasons of performance, but especially safety. If you watch the video of the crash between these two cars you wouldn't think that either driver could get out alive - but the tests actualy show that the driver of the 09 Chevy may have suffered an injury to his foot. Whereas the driver of the '59, well... link.

Risk Distribution Channels of the Future

When I first started work in the New Zealand life insurance industry the unravelling of the dominance of tied agency had already begun - companies like Fidelity and Royal life were part of that. Sovereign carried it on with Schumpeterian glee. Today most insurance is sold by advisers who have a greater freedom to choose where to place the business of their clients than they have ever had before. While the amount of business written by this gorup may not shrink I suspect that we are at an inflection point.

From now on two other channels will enjoy most of the growth:

(1) A new form dedicated sales force (employee, franchise, or tightly integrated in some way). It would be lazy to refer to it as "return to tied" because in the new environment it will bear as little relationship to the old tied agency as that does to most current brokers.

(2) Channels enabled by technology - there may be a strong overlap with what we would call brokerage here, or alliance business, or the channel above, but in this case the deciding factor will be that the sales process will essentially be so closely integrated with technology that it cannot be separated from it.

Why do I say this? The consumer has been ready for a while, but now both regulation and the changing economics of distribution now favour the control and cost effectiveness that such channels bring.