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Financial Advisers: Easy to Blame

Consumer Article on Insurance - It seems advisers are useful after all

The Consumer Magazine published a research report in their June issue titled "What if ..." discussing mortgage protection insurance. The article covered a number of areas including how mortgage protection insurance works, tips for shopping around, a checklist of what to look for in cover, taking out insurance from banks, definitions, some pricing comparisons, and some "fish hooks" to look out for.

Mark Ogden, an Insurance Adviser at Compass Life Limited read the report and sent Consumer a letter. Some of the key issues Mark outlined were:

  1. Some bank policies expire when the mortgage is settled, therefore if you were to get a new mortgage you would have to re-apply for insurance and may not be eligible or may face the risk of having exclusions or loadings for risks picked up since taking out the original mortgage. Whereas insurance companies offer standalone products which will cover you for life.
  2. Some of the figures and facts in the cover and premium comparison table are incorrect. It is stated that Asteron's product has a redundancy wait period of 14 days - it is actually 30 days. The same product is also for 'own' occupation - Consumer published it as 'any' occupation.
  3. Consumer states "You could use a broker to do the hard yards, but the broker will want to sell a policy for which they receive a commission, not a bank policy". Mark claims this is not the case as some banks such as ASB, ANZ and National Bank, often use the same products offered by insurance companies Sovereign and OnePath. Consumer also neglects to highlight that at other time banks may offer only a product which may have inferior cover to the options available from brokers.
  4. "Having life insurance isn't enough" the article states, they then go on to compare packages of cover from Life insurance companies Pinnacle Life and AA Life against companies such as Asteron, Sovereign and Tower who offer much more extensive cover.

Consumer Magazine has done a good job responding to Mark's complaint. His comments and opinion appear to have been taken very seriously and they are currently working through a number of matters in regards to the article. The errors that have already been acknowledged by Consumer Magazine include:

  1. In regards to the bank policies expiring upon mortgage payments ending - Consumer agrees this is a good point and will be discussed online.
  2. The oversight in regards to the Asteron product stated above.
  3. Consumer has agreed that the comment made in regards to brokers will be discussed further.
  4. Further to Mark pointing out the unfair comparison of AA Life and Pinnacle Life against other insurance companies Consumer have agreed that clearer distinctions between the types of policies should have been outlined.

Consumer has stated that all errors will be corrected and posted up on their online version of this article. The magazine has also declared that they will be publishing the corrections made in the following issue due out in July.

We know how much of a complex topic insurance is and the number of variations in products is huge - as our involvement in producting Quality Product Research has proven to us it is very difficult (there are more than 25,000 variables to consider) and painstaking work comparing policies and some mistakes creep in.

We think Consumer handled the complaint really well and the whole process will enhance everyone's knowledge of the area: Consumer, advisers, and clients.

So seeking advice from the right people when discussing and buying any insurance product is essential to ensure the right cover is obtained for the individual circumstances of the buyer. Perhaps the experience will give Consumer pause to consider that advisers might be worth the money.

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