'The corporate regulator has requested an audit of bank cross-selling practices after it was grilled in a parliamentary hearing on how it will address vertical integration issues among the major banks.' Read the full article here.
Advisers in Australia seemed to line up, initially, with insurers in expressing some discomfort at the release of data contained in ASIC's recent report on claims payment in Australia. In New Zealand, unaffected by ASIC's jurisdiction, people that follow such things have tended to focus on the positive endorsement of advisers and advice contained in the review: that claims are more likely to be paid when advice was provided during the sales process, a pretty powerful endorsement.
Now I have seen the first article from Australia which picks up on this point, and I am delighted to do so. It is often easy to think of the regulators job as an adversarial one. They can become adversarial, certainly, but don't necessarily want to function that way. In fact, the more we all focus on a kind of 'market development' paradigm, the better the whole outcome will probably be. This report actually contains a lot of information useful if you care about the development of the market as a whole.
Advice has a number of contributors to claim outcomes. Courtesy of ASIC, we now have data to quantify exactly how those help consumers at claim time compared to non-advised insurance. The data is in section 184 of the ASIC report - page 53. This is how it breaks down, by claim outcome:
Non-advised decline rate is 12%, compared to just 7% for advised channel claims. That is a huge variation: you are almost 70% more likely to have a claim declined in a non-advised channel product. Why is that? The chances are, its the product. Advisers do not sell the types of products that are commonly sold in non-advised channels. The differences will be mainly in pre-existing conditions exclusions and the absence of underwriting in many of these products. This is a valuable indication of the size of penalty that Quality Product Research Limited should consider when rating non-underwritten products. This may also be influenced by the adviser reviewing the potential claim, and pointing out when it really shouldn't be made.
Non-advised claim withdrawal rate is 11%, compared to 12% for advised channel claims. That gap is again bigger than it looks. The claims withdrawal rate could mean quite different things. An adviser may recommend putting in a marginal claim and withdraw it when it becomes obvious that it will not succeed. Or a client might make a claim and be talked out of it by an adviser - especially if the nature of the claim meant that it was, in fact, misrepresentation or fraud. We don't know, and it might be good to talk about this.
Non-advised partial claim acceptance is just 1%, compared to 3% for advised channel claims. This gap is again bigger than it looks. It will reflect a mix of things: the first is again product design. Advisers are more likely to choose complicated but comprehensive products which include partial payments. Non-advised channels, in their quest for simplicity, tend not to have these features. Another possibility is that advisers can advocate for payments for their clients under sections of their complex wordings that clients themselves might overlook even if they buy a complex product from a non-advised channel. Lastly advisers may be twisting insurance company arms: a client on their own is just one client, an adviser represents a large number of current and future clients too, which may prompt a little more flexibility in marginal cases.
Both channels have the same level of 'undetermined or unspecified' outcomes - of 3%.
That leaves the 'Accepted in Full' category of claims at 74% for non-advised and 76% for advised channels.
Of course, these are only averages, for some companies the decline rates are higher, and some much higher. There also appears to be an interesting effect on the level of disputes, but we will write on that later.
Lastly it should be pointed out that the claim acceptance rate on insurance you don't buy is always 0%. I am a great advocate for insurance and feel that non-advised cover fills an important gap for many people. 74% full claim success rate is a very, very, great deal better bet than not buying cover at all.
Mike King has written this article on LinkedIn about the types of relationships often held with banks and how it can effect the decisions of consumers.
A New Zealand couple living in Perth have taken ANZ to court for selling them life insurance which excludes payouts to Kiwis who are not citizens. Mr Cairns took the issue up with ANZ after an adviser discovered a clause in his policy document barring them from any payout because they were not citizens or permanent residents. Mr Cairns has had all the premiums refunded, and ANZ has changed the terms of policies as a result of the discovery. Cover for New Zealanders is being resrospectively added to contracts. However, Mr Cairns had a stroke during the policy and can now no longer obtain cover. Although offered another policy by OnePath he states that this would have required him to remain silent on the issue. Clearly it has not become a point of principle for him. Read more here.
There are wider considerations.
One is that although premiums have been refunded it is not merely premiums that are at stake. Remember: insurance is not merely about the premium and the claim payment. It is about the peace of mind that comes from knowing financial risk has been transferred. Client's want that, and when they discover that they perhaps never had it, they can become very, very unhappy about it. Insurance clients have to trust their insurers. That was always the part of the bargain of 'utmost good faith.'
The other is that consumers cannot be expected to be insurance lawyers. In this case an insurance-specialist financial adviser noticed the clause which would have denied them payment. It pays in almost any matter where you are non-expert to ask for advice and take it. That advice could even come from an in-house specialist.
'The rapid rise of the digital economy is forcing insurers to innovate to survive. They must develop new products, improve customer experiences, secure additional markets, adapt their culture and change the tasks their employees perform.' writes Jean-Fracois Gasc from Accenture in this post.
He has a point.
When change comes it is sometimes easy to find some non-productive ways of trying to find security and safety for the current business model. One is to blame other actors in the value chain. Another is to seek regulatory rescue. In our distribution of insurance three large forces have combined to create change:
- Consumerism - with more activist and engaged consumers treating insurance like they do all their other purchases
- Technology change - with a channel shift to online and call centre within the intermediated, direct, and bancassurance channels
- Bancassurance - has risen to more than a third of all new sales by delivering on convenience of purchase and building cross-selling skills
I didn't list regulatory change. In some respects that has been a distraction to the business of delivering a relevant value proposition to customers. That may seem like a terrible thing to say, but insurance regulation has remained light touch to this point. Right now, with the Financial Advisers Act review wee only have a recommendation to make the AFA Code apply to all channels. Even if accepted, that will not actually occur for a couple of years.
Clearly, therefore, changes which have affected where customers buy, what they buy, from which channels, and how, have all largely been market initiated, not legislated or regulated.
In terms of a market share growth story it is all about call centres, banks, and online.
David Chaplin reports:
"Banks have mounted an all-out attack on Financial Advisers Act (FAA) reform proposals to clearly distinguish ‘sales’ from ‘advice’ setting themselves at odds with industry bodies and consumers."
and also adds for clarity that
"...the big four Australian-owned banks and Kiwibank all strongly argue against introducing a formal distinction between ‘salesperson’ and ‘financial adviser’ into the regulatory mix."
Those a pretty strong words from David. I was interested in how we know that consumers would like a clearer distinction, and you might be too:
"An accompanying MBIE survey also found almost 90 per cent of consumers said “clarifying the difference between ‘sales’ and ‘financial advice’ would help them better understand what they are receiving”
Read the balance of the article at this link.
Southern Cross has decided to distribute life insurance to current customers. They will offer a CIGNA product, branded Southern Cross. CIGNA should be congratulated, this is an institutional distribution partner on a par with landing, say, a major bank or building society, and is one of the best known brands in New Zealand. For Southern Cross is extends their product range into a valuable area - I am sure many health insurance clients expect Southern Cross to offer life insurance and are surprised when they do not. Here is the press release:
Not-for-profit health insurer Southern Cross is launching into the life insurance business.
It’s a natural extension for a Kiwi institution with a significant track record in looking after people says Head of Product and Marketing Chris Watney.
“Southern Cross has been looking after the health of New Zealanders for over 55 years. We believe people will feel confident buying life insurance from an organisation and a brand they know and trust.”
Southern Cross Life Insurance is backed by specialist life insurer Cigna, and will complement Southern Cross’ range of insurance products which includes day-to-day, basic surgical and more comprehensive health insurance plans, as well as critical illness cover, travel insurance and pet insurance.
Watney believes there is a natural synergy between health insurance and life cover.
“Like health insurance, people purchase life insurance at important junctures in their life - it might be when they get a student loan, start a family, buy a home or get married.
“This is something our members have been asking of us for some time and we think the combination of both life and health products under one brand will make sense to people.”
Southern Cross Life Insurance will provide cover of up to $1 million and be available for purchase online from tomorrow.
Watney says, “We have chosen to focus on selling our life insurance online because in this busy world, people increasingly use the internet to compare and purchase insurance products. However we also have a team just a phone call away should customers want to talk to someone.”
Customers in good health will be eligible for a 10% healthy living discount. An additional discount of 10% will be available to Southern Cross Health Society members.
Note: The quotation tool and website for Southern Cross Life Insurance will be online from the 31st March.
After recent media allegations, CommInsure have announced that they have made a number of changes to their trauma product and claims processes. In a statement issued by the company they say they have approved a range of measures to upgrade its product.
“The CommInsure Board commissioned an independent review and other enquiries were made. CommInsure has taken a range of actions, including benchmarking of product features, targeted review of customer claims, governance changes to enhance structural independence and additional training for claims staff, including customer empathy and professional protocols,” the statement said. As part of a raft of changes, CommInsure says it will accelerate the planned upgrade of its 'heart attack' and 'severe rheumatoid arthritis' definitions in its trauma product.
It will be interesting to see the approach that they have taken. Most bank insurance products (with some notable exceptions) take the view that shorter forms and tougher definitions are the best route to simple, easy-to-buy cover. Some people say this is mainly about the bank's benefit - getting premiums rather than establishing cover. However, convenience is also a customer benefit: all the customers that abandon an insurance sale because it is too complicated have no cover at all.
However there is a different route to achieving affordability in trauma cover: severity-based trauma. Considering the example of the man who was declined for payment as a result of the heart attack he experienced. He certainly had a heart attack, but if it was judged to have caused less damage to his heart, a lower payment could have been made. Although the client did qualify for a payment of $25,000 for a Coronary Artery Angioplasty, this was not for a 'heart attack' which is the point at issue for the client.
Click here to read more.
There are a number of reasons why you may not be able to see the banks on Quotemonster or in the pdf reports.
- We don't offer the premiums for the banks on Quotemonster and therefore you will only be able to view banks if you subscribe to QPR.
If you are using QPR and can still not view the banks it may be due to either of these:
- The banks may not offer the product or options that you are quoting on. For example, a number of the banks do not offer Standalone products, they only offer Accelerated so please ensure the banks offer the products you are quoting.
- You have to ensure that you select the banks in "Step 3: Compare Insurers" in the "Research" tab. There is a drop down box labeled "Select More Companies" which lets you select which companies you want to appear on your report. Make sure you select the banks here and click 'Save'.
If you are still having issues please feel free to contact us on (09) 480 6071.