« April 2016 | Main | June 2016 »

Southern Cross Limits Policy on Allergy Treatments

Southern Cross has recently changed policies cover for life threatening allergies and GP Stephanie Taylor is not impressed. Taylor's daughter suffers from a life-threatening allergy to wasp and bee stings and previously had $5,000 cover per year. The new policy wording indicates a limit of $750 'because the treatment is a “specific” service rather than a consultation.'

Click here to read more.

Insurance In The News Today

Janine Starks writing in stuff.co.nz has this piece on exclusions. Starks advocates that consumers use advisers to pick their way through the policies. The article uses Quality Product Research resources to focus on the differences in exclusions between providers and to take particular aim at policies sold direct to customers. The general public often has difficulty comparing policy documents and understanding whether an exclusion is better or worse than another - even assuming that they take the time to read more than one policy document. Some good points are made - even if some of them may be uncomfortable for some insurers.

Susan Edmunds writes in goodreturns quoting research by NZIER based on Sovereign data that suggests a very high skew to top producing advisers in the industry and aims to estimate the impact of a possible cut in commission (by a quarter) on premiums at 6%. That is worth closer review as well. Link. Edmunds, also on, goodreturns tells us that Triplejump is restructuring. Link.






Southern Cross Life Insurance (Underwritten by CIGNA)

Quality Product Research Limited has rated Southern Cross Life Insurance (underwritten by CIGNA) subscribers will be able to review the rating on www.quotemonster.co.nz from the middle of next week. The product rates 91.6% in most situations (it depends on the sum insured) and has slightly more limited special events increase in cover provisions and slightly tougher exclusions than the highest rated products. 

The Wealth of Your Financial Adviser: What Does It Tell You?

Recently I had this fascinating conversation with a couple of people talking about financial advisers' wealth. It is problematic. In essence the question we debated was: "Is the wealth of a financial adviser something that should concern you as a client?" Here is a summary of our arguments: 

We quickly dismissed age versus stage issues: a young planner may have a pile of student debt, be new to the workforce, and yet have a great process and lots of intelligence to bring to the subject. If they are part of a larger business then their colleagues may supply additional life experience. 

But what of the adviser who is poor in later life? This need not necessarily be a problem, but might prompt questions. Why are they broke? Was it poor financial management? If so, then that could again either be a red-flag, or an asset: perhaps the reason they chose this new career was because of past financial instability. I know a really excellent nutritionist who chose her career after struggling with eating disorders. Front-line experience of either kind can be helpful. 

Equally a wealthy adviser might be troubling, not reassuring, why do they have so much money? We have seen some recent cases where lifestyle may have been funded by a little more than fair fees from clients. In our conversation we agreed that what we really wanted to know was whether the adviser is achieving their goals without instability or poor management. How to get to that? 

"Do you have a financial plan?" might be a good question "How similar is your personal financial management to the recommendations that you make to clients?" might be a more open and engaging approach. To new clients of financial advisers I say: "Be brave! Ask!"

Melanoma Patients Say Government's Announcement Doesn't Go Far Enough

The government is giving Pharmac an extra $39 million allowing funding for the melanoma drug Opdivo. We don’t know enough to say whether the specific drugs being selected by Pharmac are a better deal for patients compared to others. The strength of an independent drug buying agency is that we put experts in place to make those decisions. Of course, the strength of private medical insurance is that if you have it, and you disagree, you can still fund other treatments agreed between you and your medical advisers. Click here to watch a video from One News.

Conflicts of Interest versus Subjective Biases

I like this article by Bob Clark at Think Advisor for its contrasting of subjective biases and conflicts of interest. 

A subjective bias works like this: if we're standing around the barbecue one summer evening and you happen to mention that you have just received a big bonus payment from work and you could either buy an investment property or some shares if I have done well out of shares then I might say the property market looks fully valued and list some great share buys I am considering. But these are just two friends chatting. I am not a financial adviser, I am not going to recommend a product, or help you with that process in any way. The worst that could happen is that I refer you to someone who could.

A conflict of interest, we should all be familiar with, is perhaps best represented by the commission payment contingent on the sale. Perhaps exemplified by the financial adviser about to receive a big payment if they can just convince you to buy a product, today. Especially if you do not know how much the adviser will make, or are even sure that they will receive a commission at all. 

Clearly these two situations are totally different, and as such we should agree wholeheartedly with Clark in seeing that. But another situation exists in which I am not sure that I entirely agree with him, though, on the extent of the effect exerted by these different forces.

In this case you are seeking the advice of a share-broker who has a well-disclosed fee payable solely by you, the customer, to him in the event of successfully convincing you to buy stock on his recommendation. Let's say the fee is $1,000. 

Now for contrast we have another adviser offering a product on which she will receive a commission of $1,000 from the product provider if you accept her recommendation to buy, and, importantly, this is also disclosed - you can see it just as clearly as if there were an invoice waiting on the table, albeit made out to the product provider. 

These situations do not differ so much now. In both cases a known fee is payable if you choose to buy. We can even ignore the issue of lump-sum versus financing out of the product - modern credit products are such that a moderately skilled adviser should be able to overcome that one.

The point is this: the great purity of fee-only advice only really emerges comes when you pay the fee irrespective of whether you take any action: the advice is genuinely separate from any decision. That is quite a narrow concept of advice and if it were the only one available, there would be a lot less of it given. 


Technological Change and Insurance

Life insurance remains the biggest selling in spite of the fact that relatively few people die during a working lifetime - although sales of living covers: income protection, health, and trauma have risen considerably. We expect that trend to continue, as social beliefs about prevalence and impact of the risk of early death change, and the real experience of non-fatal serious illness becomes accepted. 

Another big area likely to change is motor vehicle insurance. It is possible that driving could be made a lot safer. What if there were 90% fewer car accidents? How would that affect vehicle insurance markets? Warren Buffett thinks that - although it is a long way in the future - it would logically reduce the need for insurance a lot. Although frequency is only one factor to consider in holding cover. Like life insurance, if there remains on a small frequency of catastrophic risk, then lots of people will still hold cover. It will be interesting to see.