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Population, Life Expectancy, and Birth Rates

Only somewhat related to our usual diet of insurance and risk-focused reporting, population issues are still an interesting adjacency, and this article succinctly deals with the common misconception that population growth is 'out of control.' Not that I would like a society where it is controlled, but rather this underlines that there isn't, actually, any need to control population growth.


Jeremy Bernstein sent through a link about this new project - Peercover - which is seeking kickstarter funding. This has some interesting risk sharing features, but some obvious difficulties.

You can check out the discussion over at Ripple, where Jared Mimms is posting about the idea. He's one of the folk behind Peercover.

Essentially the proposition is to create mini-mutuals which are crowd-sourced. The example given in the forum is of a group sharing the risk around having a wallet stolen. Although some articles have been published under aggressive headlines like "The Death of the Premium" with opening paragraphs cheerfully proclaiming the demise of modern insurance companies, the examples that are shown could easily be interpreted as case studies illustrating why particular features of modern insurance companies exist.

One is the development of algorithms and tools to establish who you trust enough to share some of your risk. This is critical, if too few in your group are worthy of the hope, sorry, trust that you have that they will pay your claim, then your pool will fail.

Another is that the group must write its own terms, could be a pretty tricky job. These are non-experts in risk assessment and quantification; they just see how systems would enable risk sharing. 

Another one is that casual, throwaway statement in the example of insuring each other's wallets that they assume the risk of a wallet being stolen is equal. The only thing is, the risk isn't equal, unless all the participants in the group are equally risky. To operate effectively the group would need an understanding historical risks and how to price them. 

In this premium-free world trust is far more important than it is with insurers. Insurers are repositories for knowledge about risk pricing, and they are a focal point for regulation so governments can set standards, and their cost structures enable them to retain experts. All those things are valuable, but are invisible. Participants in new risk pools are about to discover first-hand the parts of the insurance value chain that they don't currently see, and just how useful they actually are.

Finally, hate premiums as much as you like, but the fact that a stranger somewhere else that you don't even know has paid for their risk means you can be much, much, more confident that should you have a claim, the money will be there.

Product Rating Changes

It has been a busy day or two with the following product changes being rated in QPR, which will go live early next week.

  • Updated ratings for AIA Indemnity and Agreed Value Cover
  • Added AIA Premier Cover
  • Updated AMP Lifetrack Trauma
  • Updated Southern Cross Changes
  • Revised total disability ratings for benefit periods 1,2, and 5 years

Have a good weekend folks. Also, keep an eye out for a review of financial advice options for older people in The New Zealand Herald tomorrow.


Insurers I Could Not Sell, Insurers I Would Choose

I was asked yesterday whether there were any insurers I wouldn't deal with based on their financial stability rating, or claims performance, or service.

Out of the insurer's we quote on Quotemonster, there are none I could not offer a client in the right situation. Just to be clear about that, I could own or could offer all of the insurers on that list. But that isn't the same as saying that I would be equally happy with all of them - I wouldn't be. The on-sale products in Quotemonster are all reasonable products, but when buying, one has to make a choice. You will probably only buy one of them or, at best, perhaps the best for you in each category.

Being discriminating there are many factors I would consider and you should consider when offering cover to your clients. But in order to do that you need to do no more - and no less - than a full personalised advice sales process. That means following the six step process and the guidance note from the FMA on reasonable skill care and diligence - with examples shown for insurance comparison. The particular point here is that the insurer I would choose, and the insurer you would choose, and the insurer each client would choose may well be different.

That's why personalised advice is important.

So it isn't really helpful me telling you who I prefer, or who I happen to be insured with because of pre-existing medical conditions, or who I bought on price, or service... because the importance of any of those factors is specific to me. You need to get out of the client what their priorities are: security, service, cancer definitions, budget, heart definitions, or just plain old preference, and when you understand what they really need and want work to find the best solution.

Quoting for Alteration

From my earliest days in the industry quoting on alterations has been a real pain - we used to send carefully filled in forms to actuarial and receive them back, days, sometimes weeks later. Of course, with the switch to term insurance things have become easier, but still there are enough nasty surprises and slow processes to make any innovation in this area news. So I was relieved for lots of advisers to see this innovation:

Partners Life has launched cutting edge advances in its Quote Software which will allow Advisers to perform real-time quotes for alterations & increases to their existing policies.
Managing Director Naomi Ballantyne said it would significantly simplify the existing business application process and put control back into the hands of Advisers.

“The ability to produce a 100% accurate real-time quote for any alteration/increase to an existing Partners Life policy allows Advisers to generate multiple quotes for varying scenario’s within a matter of minutes. Compare this to the industry norm of having to wait weeks for the insurance carrier to produce these quotes for you can only be good for everyone concerned”.
Partners Life Chief Technical Officer Peter Lassen said to his knowledge that Partners Life was the first intermediated Life Insurance company in New Zealand to offer this functionality.
Ballantyne said that Advisers had always wanted the ability to perform these existing business quotes but the technology platforms of the past just weren’t up to it.

Chris Gilchrist on Transactional Advice

Chris Gilchrist, at UK Money Marketing, has a point to make here about the future of transactional advice - pretty much that there isn't one. I have been critical of some of Gilchrist's articles in the past but there is some important material in this one which I will probably seek to expand on in some later posts. Link

This is a pretty forceful quote:

"There are still many advisers who believe that their clients owe them a living in death as well as in life."

We have written before about the different levels of advice-giving, from pricing and application assistance at the lowest level righ up to strategic advice and ongoing support at the highest level. Finding practical ways to shift from the lower end of the scale upwards is difficult, but it is worth it, and your clients will thank you for it.