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Reckon Insurance is Expensive?

We're looking at family budgets at the moment as a part of some strategic work we're doing for a big consumer services client. Half a dozen things that routinely occupy a bigger place in the family budget than insurance:

Sky    Vitamins    Takeaways    Cigarettes    Alcohol    Take out coffee

For those of you that have trouble working with advisers on the budget issue these are worth bearing in mind. We need to do more coaching sales staff in this area to help with conservation activity.

We could go on. How about the unused gym membership? There's no evidence of vitamin deficiency for virtually all Kiwis, yet off they go... completely useless. Here are some good questions to ask someone struggling with the affordability issue: 

  • How much did you save last year?  
  • How much have you got saved in total?

The answer to the first question is the amount you can afford to stop earning without noticing it in your lifestyle. The answer to the second question tells me how long you can sustain your lifestyle on your savings. The answer to both is routinely: nothing. That means most people can last as long as their credit card and sick pay hold out before they need the insurance to kick in.

What else could they do?

Well, they can have a look at their balance sheet and see what assets they could sell. They can also have a look at their expenditure and consider what expenses they can cut. It's worth being familiar with the major items of expenditure just so you can see how inflexible most family budgets actually are. Home mortgage, power, food, fuel can all be called, for sake of argument 'non-discretionary' - of course some changes can be made in these areas, but they are difficult to make.

Much easier to make a minor change now and find $100 a month to fund some insurance.


Fat

Holiday weight gain = 1/2 a kilo. That's 4000 calories (give or take) which is pretty much eating twice as much as I should for a day and a half, which is as you would expect, considering that on Christmas day I did not get in my customary run. I did on Boxing day, but it was a sad little jog dragging my slow and sorry arse around Birkenhead. Yesterday was a marked improvement, and today at the gym I felt quite a bit better. However, it will be a long slog.

You see, your body is a set of scales, energy in minus energy out. But it is considerably harder to force energy out (refer, for example to this calculator which shows the calories expended in exercise) than it is to force in another mince pie. Then there is calorie restriction: I can rarely manage a deficit of more than about 250 calories a day, so you can see that it would take a good 12 days at that rate to get back to where I was. However, it is unlikely that I will manage a deficit until after New Years Eve, so I will probably be lugging the fatty residue from my indulgence around for the better part of a month before I am back to pre-Christmas levels.

Such is the grim mathematics of eating. As my nutritionist said once: you can always out-eat your exercise programme.


The 'tween days

Our kids had to be chased back to bed on Christmas morning at 3.44am! One of my best presents was chosen by my four-year-old son (Matthew). He 'bought' (with Mum's assistance) a Nerf Gun. It's a Nerf N-Strike with night finder sight - that's the cool red dot that you can scan mennacingly along a wall towards your intended target. You can have a look here. Although I have since discovered that you can get fully automatic Nerf weapons complete with big banana-clips full of ammo. I suspect I shall have to obtain something like that for the office.

Although Barrel of Monkeys was not one of our gifts we did spot this review which makes a good case for BoM (as it is known to afficionados) being the gold standard in fun, indeed, the yardstick by which all other fun is measured. Apetastic!

Actually I did receive Dixit, which is a beautiful game. It's won dozens of awards, but best of all has a dreamlike quality in its presentation. If you've been raised on an Anglo-Saxon diet of average board games (like Cluedo) right on down to the truly awful (which is Monopoly, in my humble opinion) then you may have a jaded view of these cheerful family-focused diversions. Try German board games, try Dixit, try Settlers of Catan. Hell, try Barrel of Monkeys!

Well, there were still four page views on Christmas day, so whether those were just miss-keys or perhaps, like me, a few of you needed to escape the constant badgering to build something out of lego, put batteries in a new toy, or prepare for the next meal - I just don't know. However, I love to write, so I will keep up the odd post in these days between Christmas and New Year just to keep in touch.

Speaking of the next meal, I did a whole baked salmon. I found a Tesco's video clip to enable me to break this new ground, and it was easy - and looked very impressive.

Our holiday programme of activity includes picking up visitors from the UK the day after tomorrow and a trip down to Ohakune for a few days. A friend has recently bought a property that sits right next to a trout stream and has a lovely view of the mountain. Later in January we have a short trip to Nelson.

Work-wise I have a couple of projects which need to keep getting pushed along over the next couple of weeks so we can be off to a flying start in the New Year. The most I can say about those is that it is really encouraging that after the worst few years financial services has seen in a long time there are still people who are keen to do innovative new work in the field.

 

 


Trading in Life Insurance

It CAN get uglier than this, but on the face of it this story looks pretty ugly. It seems that when trading in any asset there is scope for skulduggery.

Recall that we have just had a major revamp of the rules governing the licensing of real estate agents, for example. Just because there is great scope for parting people from their money in that game, we won't ban the sale of houses.

Hank over at Insureblog is no fan of stranger-owned life insurance (the outcome of pretty much any sale of insurance outside of a group of people or institutions that might have what we used to call 'insurable interest'). My view is that you should be able to sell your life insurance to a stranger, but that there need to be some special controls over that process.

Do you think that life companies should include a warning in the policies issued here about the risks of assigning the policy to another person who has no insurable interest?


ACC Changes - comments by Don Rennie

On the radio on the way in to work this morning I though I heard a comment along the lines that 'private insurers were not geared up to manage long term claims' and that this was attributed to Don Rennie. Can anyone else find a reference to such a comment or confirm the source?

Of course, with radio reports one can never tell the context of the original comment. The definition of the parameters for 'private insurers', 'geared up' (whatever that means), 'manage', and 'long term', could all vary so much as to make early comment meaningless. However, I would point out that for the better part of 40 years private insurers have successfully managed many tens of thousands of long term claims (and many more short term ones) both for the 30+% of New Zealanders that have private medical insurance and for the 20+% that have income protection insurance - which typically requires replacement of income from the time of disablement to age 65 if the claimant remains disabled.