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Embrace Life - Personal Risk Assessment

This has to be one of the most beautiful road safety advertisments I have ever seen. It also underlines how sketchy our understanding of personal risk choices that people make still is. You know, the "I only buy organic carrots because it's better for me but I still smoke" type of person. There must be a logic to it somewhere. But, save time shopping, wear your seat belt, quite smoking, and go for a run, Okay!

Waste and the absence of CRM systems in Sales Teams

I don't know how many times I have had the conversation with someone about CRM for the sales team. Most life companies have an agency system. In effect this is facility that bolts on to their accounting function: it's all about handling commission payments for agencies and agents. It is NOT A CRM.

The best example I can give of this, and many advisers will be able to bear witness to it, is when quote software is released. We've just received four copies of one companies quote software. Two copies of another.

Sure, envelopes aren't expensive. Neither are CDs. But quite often quote software includes components - such as distributed versions of proprietary database software - and these are usually paid for on a per licence basis. Then you've got opportunity cost: the duplicated systems, Outlook workarounds, and poor quality distribution lists that business development and marketing staff have to put up with all the time. Then you have wasted effort - a lot of adviser information, for example, could be self-managed online.

All in all, once you've finished figuring out how to stay in business this year (re-pricing and compliance are acceptable excuses for being busy, after all) one of the projects you need to pull out from the bottom drawer is how to improve the efficiency of your sales management function. A good CRM is vital infrastructure for that work.


Gareth Morgan on Insurance

Just reading Gareth Morgan's round up, I was interested to find the following on regulation:

It's long overdue. I hope it cleans out the bad portfolio construction practices, separates commission salespeople from advisors in the public's awareness, helps the public realise that insurance has nothing whatsoever to do with investment, and neither insurance nor investment has anything to do with budget advice or so-called financial planning. But mostly, I hope it helps restore the public's confidence in a sector that has behaved so badly over recent years...  Link

Which is all good. If you mean that insurance shouldn't be wrapped up and confused with investment making the proper costs of each hard to figure out. AMP recently withdrew it's old whole of life range. Fidelity has withdrawn it's insurance and investment plans also. Others have done likewise. This makes sense and is, perhaps, a benefit of regulation. Or maybe it would have happened anyway - the volume of whole of life sales was dropping even in my first year at Sovereign, in 1989, and was very, very small recently. So maybe not.

But hang on a minute... does insurance have "nothing" to do with investment? Let's turn to Gareth's next commentary to get a lesson on that.

A recent Dominion Post story raised concerns about the role of KiwiSaver providers and trustees when it comes to early withdrawal claims. A KiwiSaver member who had a brain haemorrhage-and now suffers seizures and can't work or drive-was twice refused permission to withdraw his KiwiSaver money under the serious financial hardship and serious illness clauses. On his third attempt, with the help of a consultant and some media attention, the trustee approved the withdrawal... Link.

Maybe insurance is useful after all!

If this KiwiSaver had had income insurance then he would not need to be asking for what is probably quite a small sum of money from his KiwiSaver scheme. Not that I don't think he should have it - I just don't know enough about his case to tell. Worse yet, what if his injury is permanently debilitating, but doesn't affect lifespan? If he had insurance on his contributions his KiwiSaver would have carried on being paid and he could look forward to a retirement nest egg.Cover on contributions like that typically costs around $5 a month - but you can't do that, because lobbyists like Gareth made sure you can't insure your KiwiSaver contributions.

You see, insurance and investment are linked like this: If you aren't already rich, then while you are saving, insurance can plug the gap if anything bad happens. It's not hard is it?


Medical Tourism

This is a worthwhile article (check it out here in full) especially just for this statement:

Let's dispose of the silly meme that health insurers "ration" care in any way. They cannot make a person undergo a procedure, nor can they withhold treatment. Insurers can only decide, within the contractual terms of the policy, whether or not they will help to pay for any such care.


The Fear of All Sums

The Economist has an interesting article on some analysis of sub-prime borrowers. There is a strong correlation between the default rate and numeracy - even after control for amounts borrowed, and other factors. You can even take the rather basic test yourself so you can see the kinds of things the borrower would have to get wrong in order to have been considered as having poor numeracy. Expensive financial regulation may be one thing we can do to prevent a repeat event, but better maths classes would surely be something we can all benefit from. It also raises some interesting questions about application processes - maybe lenders should insist that borrowers do the sums to work out how much they can afford rather than having brokers do it... that would sort them out!