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ProducersWeb Lead Generation Series

ProducersWeb has a series on an evergreen subject: how to generate leads. They offer 50 best ways to generate leads, which is timely for advisers focused on how to grow:

Lead generation ideas 1-10, 11-20, 21-30, 31-40, and 41-50.

You may need to get a login to access the content, but it is free, and the email flow is relevant to most advisers selling life and personal lines products.

Directors Liability Insurance Details

Kensington Swan has done a review of the decision around Director's Liability Insurance following a recent judgement from the Supreme Court. It is well worth reading - and you can read it at this link - this is the key outcome:

The Supreme Court restored the decision of the High Court in the BSFL proceedings. This means that the defence costs of directors will no longer necessarily be covered under the D&O policy if they are sued for an amount greater than the policy limit. The fact that the insured’s liability for defence costs is established before liability is ascertained is irrelevant.

  • What does this mean for insurance? If it is the intention that company would like to assure Directors that they will meet defence costs then there may have to be some changes to current practice.
  • First, increase the size of the D&O policies to make the sum insured large enough to cover all eventualities - but this could result in huge sums, and prosecuting parties may simply inflate their claims to deny the defence costs to the Directors.
  • Companies may set aside funds in trust to defend Directors from legal claims, in order to ensure that they can continue to attract high quality candidates, especially for non-executive roles.

Insurers may develop separate Director's defence cost policies which can be purchased and held by directors separately.

Emergency Funds, Insurance, and Good Risk Management

How much money a client has available to help out in a crisis is an important part of the process of selecting insurance cover. The presence of sufficient funds to assist in a financial crunch induced by, say, disablement, major medical condition, trauma, or death needs to be taken into account when risk planning. Let me give you some examples: 

Advance payments on life insurance contracts - which provide for some part of the sum insured to be made available very quickly, before the full claims assessment process has been conducted, can be useful. But they are far more useful to clients with less than three months salary available as savings. On the other hand, to clients with good assets, access to credit, and cash at hand they can be effectively ignored: since all they would do is save the client some interest for a couple of months on a relatively small sum of money.

Income protection benefits paid in advance, rather than in arrears, can be a lifesaver for families on tight budgets - effectively bringing forward by a month the payment. For other clients, again with good assets, access to credit, and cash (or a cash-like stream of invoices being paid) then this is simply not an issue: the same claim amount will be paid, just a month later.

It is almost universally true that people with more money have more choices. It is the same in the job of risk management: if clients undertake a multi-pronged approach to risk in their lives they can afford to have better cover for more conditions. Although you won't discover clients that already do these things it may be possible to advise them to undertake the journey. What about this scenario: 

A couple in their 20s who are smokers and are contemplating taking out insurance meet with you. As a young couple they haven't seen much need to accumulate a reserve - and usually spend all they earn, or occassionally save up for a holiday. They can make use of all the risk management tools:

Risk avoidance: they know they should stop smoking, showing them the difference in rates might just be the decider that helps them move on the idea. They can take out cover now and achieve a reduction to non-smoker rates in a year or two - which will automatically create a budget for more substantial cover later.

Risk reduction: perhaps one of them has a choice to make around work - pursue development as a technician working on cell-phone towers, or develop more as a test engineer. The latter will be a class two occupation leading to class one. The former may have significant limitations - and it's not just about saving premiums: what about when they want to have children?

Risk mitigation: accumulating an emergency fund would enable them to meet risks that they cannot effectively insure, or allow them to choose longer waiting periods on their income protection saving more money or enabling higher sums insured and longer benefit periods for the really catastrophic events.

Risk transfer: buying enough insurance transfers some of the financial consequences of risk to the insurer - it makes sense to do this for the highest impact issues and to have the broadest range of risks covered by the plan.



Registered Financial Planners may need to be careful of boundary issues in their regulatory status before offering advice on accumulating emergency funds - it could take them into an area where they would need to become Authorised Financial Advisers - however, the issue is an important one, and can either be dealt with without investment advice, or may be another good reason to become an AFA.


Time is Everything

This story from an insurance adviser in the US is just another in a long line of 'just in time' stories that show the value of planning ahead. There is a parallel stream of 'just too late' stories that doubly heartbreaking. When I ran LJ Hooker Financial Services North Shore we got examples of both types of story, including one where I was called by the partner of a person who had decided not to take out cover and subsequently had a heart attack. Link.

Causes of Death Ranked by Years of Life Lost

Sometimes when you see raw population average causes of death you realise that they must be skewed - as people have to die of something, they tend to be heavily weighted towards cancer, the incidence of which rises and rises wwith age.

Another way to look at this and still get a simple list of causes of death is to rank them by years of life lost, not raw numbers of deaths. That balances numbers and impact. Here is a recent list compiled by New Zealand's ministry of health:

able 14: Major causes of death, 2004–06, ranked by years of life lost (YLL)
Māori Ischaemic heart disease Ischaemic heart disease
Suicide Lung cancer
Lung cancer Chronic obstructive pulmonary disease
Motor vehicle traffic Cerebrovascular disease
Diabetes Diabetes
non-Māori Ischaemic heart disease Ischaemic heart disease
Lung cancer Cerebrovascular disease
Cerebrovascular disease Breast cancer
Suicide Colorectal cancer
Chronic obstructive pulmonary disease Lung cancer


Here is the link to the original article.

RBNZ Consultations on Insurance Solvency Standards

From the RBNZ release:

On 23 December 2013 the Reserve Bank issued a consultation paper entitled: Insurance Solvency Standards: Guarantees (PDF 416KB). This consultation paper contains an exposure draft of proposed changes to the solvency standards for insurance businesses in respect of the solvency treatment of guarantees. The intent of the proposal is to ensure that the level of credit risk mitigation received by licensed insurers from the use of guarantees is appropriate. It is intended that the proposed changes be implemented following a transition period. This is the second consultation paper on guarantees. The first was issued on 10 June 2013.

Submissions close on 28 February 2014.

Please refer to the the Reserve Bank website for more information.

Insurance and Moral Choices

Buried in the history books of most modern markets lies a secret: insurance was once regarded as immoral. It was considered a form of 'betting on death' - in the UK, and the in United States this is well-documented - today, markets have got over this. Religious objections were (largely) overcome. Practices were modified to ensure that moral hazard was reduced. For example, legal limits are placed on the insurance of children, who are particularly vulnerable. Some jurisdictions retain limitations on insurable interest. Insurers have tougher underwriting standards for higher sums insured and are aware of their correlation with homicide and suicide - so they consider these as risk factors even when there is no legal requirement to consider insurable interest.

What moral issues remain?

This one, is a significant example. Although these objections to "Obamacare" are sometimes characterised as purely political I think it is logical to consider that people who have dedicated themselves to a religious life can have deeply held beliefs which come from other motivations. While their choice is not the choice I would make, I do respect their point of view, and their objection to the bureaucraticmechanism is also one I can understand. This blog post provides a fair, powerful, and succinct review of exactly why The Sisters of the Poor have an objection. Link.