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Disability - what's in a word?

Disability does not mean the same things to different people. For some it means TPD (such as AMP) for others it means income protection insurance. But even within those categories, there are some wildly differing definitions of disablement. The first crucial distinction is whether there is a requirement for the disability to be permanent. If this isn't present the definition can then be broken down into four categories

1. Unable to follow your OWN occupation - with subsets of definition based on whether this is measured by one or more of the following criteria:

  •     Inability to perform income-producing tasks
  •     Percentage loss in earning
  •     Time-based definitions ('more than 10 hours per week')

2. Unable to follow ANY occupation - in effect this is the class four definition for income protection. With all the above criteria

3. Confined under medical supervision (hospitalisation or homecare)

4. Unable to perform a number of activities of daily living (one or two out of a common set of five)

For permanent disablement the definitions are broken down:

1. Permanently unable to follow your OWN occupation

2. Permanently unable to follow ANY occupation

3. Unable to live independently / unable to perform certain activities of daily living.

Mainly the qualifications are by test (unlikely ever to recover) but also by exclusion. Of particular note is the definition which excludes any pre-existing condition.



Explore the Shore

I've just been given a little slip of a book: "Explore the Shore Volume Three - Kaipatiki Area" already I love it. There are so many bush tracks around here, plus coastal walks provided you keep half an eye on the tide timetable, it's fantastic. Introduced to the first of these through a trail run the weekend before last, I am now thoroughly hooked. We rane at least 11 kilometres (it felt like a lot further) at least 90% of it on bush tracks, and we met only three people. Yet we never left our well-populated suburbs. Hat tip: Aneel Ravji.

AXA Life Rate Changes - UPDATED

At one extreme some rates have fallen by as much as -13% (some older ages and non-smokers) and at the other they have risen by +120% (very young ages and smokers). Reviewing our old-new comparison we find that most rates are unchanged and the average (mean) change is +10%.

Thanks to a little correction from Brian Lenehan, I've realised that the last sentence talks about the average change, which could easily be misconstrued as an average increase of about 10%, which it isn't, across the portfolio the change is up 3.9%.

Not So Simple

Recently someone said that life insurance was so simple anyone could buy it. I think that's an aspirational statement - many insurance products are simple enough to buy without advice, but I've just been reviewing a bank life product policy document, and it reveals some key differences with the cover available from most of the non-bank life companies. 

Most intermediary-sold products contain only one exclusion:

  • suicide during the first 13 months.

It is that simple.

Bank insurance products often contain a raft of additional exclusions:

  • War, declared or not
  • HIV / AIDS
  • Alcohol or drug abuse
  • Involvement in an unlawful act - convicted or not

I don't know what counts as an undeclared war or not. Terror attacks are unusual, although I have friends who were in Bali when the bombs went off there, and I stood in Paddington station six weeks before the bombs went off there. We get no help from the bank policy document as to whether bad luck would have seen us caught out by these events.

I don't know why you would be covered if you caught one sexually transmitted disease and not another. I don't know why a Haemophiliac using contaminated blood products should have their claim declined. You can justly point out that HIV / AIDS is rare in New Zealand, so it shouldn't matter. But that cuts both ways: since it's so rare, why exclude it?

I don't know how many drinks you'd have to take for this bank to consider it abuse. Or whether the one time you took P would be it - and your family would be out of luck. Or whether you were unlucky enough to be slipped a mickey finn and now your life insurance doesn't pay out.

I don't know whether involvement in an unlawful act includes being 10kms an hour over the speed limit or perhaps its the one time you drove oblivious through a red light and got hit by a truck. You broke the law. It will show up in the police report. Will the bank pay?

There is a saying in the insurance business - it's about creating a certain financial outcome in an uncertain life. Since a policy which doesn't have all these exclusions can be had for the same money, I'd buy one of those in preference.

But the bank has a choice too: since getting rid of the exclusions doesn't seem to affect the price, why don't you ditch them?

Thankyou Matt McCarten

Matt McCarten's recent publicity (article in the NBR, by Matt Nippert) around his insurance policy has been helpful to the life insurance industry, and also to many consumers that will have insurance policies and may not be aware of their contents.This is a great public service. It may help many families with similar problems and more ordinary circumstances.

Insurance is so rarely in the mainstream media that I simply never look for it there - and so had to be told about the story by a journalist, David Chaplin. Although some writers and commentators are focused on the proposed use of the funds to pay off a debt to the IRD, and reminding readers how that debt was built up, it's the fact that Matt McCarten is a high profile individual combined with the fact he has in all other respects acted just like joe average.

He has a policy for a typical sum of money - in fact, almost the modal average for new life policies. He hadn't read it - I don't blame him, very few people read the documents, and I'm writing my blog this morning in preference to reading policy documents, they are hard to read. But as he thought about his debts and his terminal illness he thought he might be able to use it, which is a good idea. Of course, when the same idea forms in the head of the ordinary Joe he phones the insurance company. Then he discovers that they are quite prepared to pay out if there is a terminal illness.

That's what the industry is here for...and because he's in the media, lots of people have got to hear about it, which is good.

Incidentally, I felt that Emily Hanna, of Sovereign, handled it very well.

Why is medical cover so expensive in the US?

So why is medical cover so expensive in the US? There are certainly many reasons. You can point to legal claims. You can point to the simple fact that GDP per capita is higher. Another point is mandates.

Here in NZ we have a default setting to expect minimal health-care - it's the rationing. Only this morning the doctor was debating whether to get an MRI on my son's leg - he felt that it wasn't necessary. I agreed, but I wonder how much of that view is driven by a desire not to waste resources, which sometimes will lead to under-prescription. Usually we hear about the reverse in the US.

It isn't just about the presence of insurance leading GPs to take a defensive approach and order extra tests - mandates require insurers to cover procedures and drugs that they might not otherwise cover. Pregnancy is hotly debated - most people want pregnant women taken care of, but pregnancy is usually a choice and so it is legitimate to ask... why should I pay for that care? Then there are quitting smoking programmes, for example. Non-smokers might ask why they should pay for such programmes when they already don't smoke.

Of course, here in NZ non-smokers do the same, but we don't pretend it's a private medical insurance cost. Reasonable people can disagree about such things, but silly examples can be found that we can all take issue with: some mandates can include items as silly as baldness treatment. Once you start including all this malarkey it is easy to see how you can double our level of healthcare spending.


FNZ Continue to Shine

FNZ, who have offices in Wellington, and were started here in New Zealand, continue to win new business in the platform sector, by Natalie Holt, at Money Marketing.

Anyone who doubts the ability of New Zealand companies to operate at the leading edge of both technology and financial services should familiarise themselves with the story behind this story:

"FNZ had around £20bn of assets under administration in July, saying it was looking to increase that to £100bn by the end of 2013."


Product Rate Changes

AXA have put through a minor life rates change which takes effect today. Life pricing comparison subscribers will see their database updated by the end of the week.

TOWER and Sovereign medical rates both go through scheduled updates, TOWER's effective 1 April, and Sovereign, 1 March. Health pricing comparison subscribers will be contacted about the schedule for updating rates, but it is likely to be the week of the change.