Partners to publish company insights, and more daily news

Rob Stock, writing for Stuff.co.nz tells that Partners Life has announced that it will be releasing a publication that reveals insight into many aspects of the business in the coming weeks. Chairman Jim Minto has said that information about complaints, unsuccessful claims, IP premium increases, and withdrawn products will be included in the publication.

“Life insurer Partners Life will begin publishing information about the $2.7 billion-a-year industry which is usually kept from the eyes of the public, and is challenging other insurers to do the same.

In about four weeks, Partners Life’s chairman Jim Minto said the company would begin publishing information including the number and types of complaints the company received from customers, and the proportion of claims not paid.

It will reveal 9 per cent of its claims made were not paid.

Other uncomfortable information it would reveal include the 12 per cent increase in premiums on its trauma and income protection policies, which had seen spikes in claims, and the 314 complaints it had from among its 201,000 policyholders.

It has withdrawn its funeral cover, a type of insurance the FMA and Reserve Bank criticised as poor value, and will reveal details of changes in its underwriting on policies to limit the risk presented by the Covid-19 pandemic when accepting new policyholders.”

Naomi Ballantyne said that the evidence Partners submitted to the FMA and RBNZ should also be shared with customers. Naomi suggested that the publication of such information would encourage competition to offer fair treatment and create a record of insurer promises, minimising backtracking.

“Naomi Ballantyne, Partners Life managing director, said in 2019 the FMA and Reserve Bank told insurers to provide evidence that they were not ripping off customers.

Insurers had to comply, leading to the September 2019 report in which no insurers were named and shamed.

Ballantyne said: “Having done that huge piece of work, and having the regulator know all of the things we do, we said, ‘Well, that’s great to tell the regulator, but no-one else knows’.”

“All that information we provide to them, we felt we should provide to our customers,” she said.

If all life insurers published the information it would encourage competition around good behaviour towards policyholders, but also create a public record of promises from insurers to policyholders, making it hard for companies to backtrack on them.” Click here to read more

This is a valuable initiative. Of course, much of this information is hardly confidential - but the level of detail in the disclosure is new. I know that the industry, working through the Financial Services Council, is keen to develop more data sharing. Meanwhile, pro-active disclosures of this type are valuable, adding to the transparency in the market and allowing journalists and consumers to understand what happens at insurers. 

Common claims payment reporting is a difficult area - defining what counts as a potential claim is critical to establishing an accurate and comparable number. For example: given Partners Life's high levels of income protection and trauma coverage a claim decline rate of 9% does not sound particularly bad, given the usual disagreements, misunderstandings, and that fraud is real. An insurer that issues only life insurance could probably report a much lower number - because death is harder to fake than, say, attempting to stretch out an IP claim because the jobs market is tough right now. An encouraging thought is that having a good conversation about what claims get paid, and what should not, gives confidence to consumers in what they are buying and its sustainability. 

In other news:

Suncorp: Customers only cutting insurance as an “absolute last resort”


Southern Cross experience a surplus, and more daily news

Southern Cross has reported a surplus of $32.4 million for the year ended 30 June 2020. This financial reporting comes after the $50 million return to members. $972 million was returned in claims in the last financial year, this equals to 85 cents in claims being returned for every dollar received in premiums.

“Southern Cross Health Society Group has today released its annual financial results, posting a surplus of $32.4 million for the year ended 30 June 2020.

The announcement follows Southern Cross Health Society’s pledge during the Level Four lockdown in April to return $50 million to its members.

In the last financial year, the Society returned $972 million in claims and received $1.138 billion in premiums.

For each dollar received in premiums, it returned 85 cents in claims to members, compared with an average of 62 cents in the dollar among other New Zealand health insurers.”

“The business paid out 72 per cent of all private health insurance claims, significantly more than its 62 per cent market share based on Health Funds Association of New Zealand data.

Nick Astwick said that Southern Cross was focused on members during the last financial year. This included pledging to return $50 million, setting up employees to effectively working from home and ensuring the business digitisation process is on track.

Chief Executive Nick Astwick said the Society’s focus during the last financial year was on taking care of its members: “We were with our members from the start of the pandemic, returning $50 million to them, and introducing a significant range of options for those in need of hardship relief.

“At the same time, our workforce was very quickly set up to work remotely, ensuring service levels were seamlessly maintained.”

Astwick said cost-saving digitisation of the business had continued at pace, with 82 per cent of customer channels now fully digitised, and more than 96 per cent of claims submitted digitally.” Click here to read more

In other news

Southern Cross: Woman who lives in fear of jaw dislocation determined to get replacement

Southern Cross: Southern Cross gives support to students' mental health programme

AIA: Depressed man wins $173,000 battle with insurer AIA - there will be more discussion of media claims coverage in the forthcoming quarterly life and health sector report. 


Insurer wins argument over chronic pain claim, and more daily news

The Court of Appeal revealed its verdict on the case between Asteron Life and financial adviser Peter Taylor. According to the story: Peter Taylor made an Income Protection claim in 2010 saying that as a result of his bone cancer he was suffering from chronic pain. Peter was able to get payments after supplying the required information on his medical condition and ability to work, but in 2014 Asteron Life suspended the payments stating Peter’s earnings made him ineligible for payments.

"The Court of Appeal released its judgment on Wednesday.

Taylor first took an Asteron Life income protection policy in 1994 and made a claim in 2010, saying he had bone cancer and suffered chronic pain.

Taylor was required to provide progress reports to Asteron describing the current state of his medical condition, whether he had been able to work, what income he had earned from working, and certain other matters.

He received payments until September 2014, when Asteron suspended them. It was concerned that he was earning at a level that would make him ineligible.”

Unhappy, Peter went to court arguing that he was still entitled to payments.  Asteron Life stated that he was no longer entitled to payments and counterclaimed for repayment of the amount paid out to Peter. The court noted that Peter used the payments for holiday homes, cars and overseas trips and ruled in favour of Asteron Life. The insurer was awarded $371,286.70.

“Taylor went to court seeking a declaration that he was entitled to continuing benefits under the policy, and wanting arrears of payments.

Asteron denied he was entitled to any further payments and counterclaimed for repayment of all sums previously paid.

It said he had made false statements about the extent to which he worked while on claim.

The High Court sided with Asteron and it was awarded $371,286.70. That court noted that he had used his insurance payouts to fund a holiday home, cars and overseas trips.”

Peter then took the case to Court of Appeal. The judge again ruled in favour of Asteron Life saying that Asteron Life was entitled to a reduced counterclaim payment of $51,835.64.

”The Court of Appeal said Asteron was entitled to succeed in its counterclaim but could only recover payments made in respect of the periods about which Taylor was found to have dishonestly provided false information.

“The judge declined to find that the initial claim made in July 2010 involved false statements that breached Taylor’s obligations in relation to making claims. So Asteron’s claim as pleaded, which was founded solely on the allegation of breach of utmost good faith, could not succeed in respect of the initial period from January 2010 to July 22, 2010.

“There may well have been another basis on which the payments made in respect of that period could have been recovered. But they were not pleaded by Asteron, and Asteron did not give notice that it intended to support the High Court judgment on grounds other than those accepted by the judge.”

That reduced the amount owed to Asteron by $51,835.64. Taylor has since sold his insurance broking business. Click here to read more

In other news:

Financial Advice webinar: Economic Update by Economist Tony Alexander

Financial Advice: 2020 Conference registration

AIA: COVID-19 UPDATE


Cancer - risk factors related to diet and exercise

Cancer is the single largest cause of death in New Zealand, but what causes cancer? The link between drinking alcohol and the disease is stronger than ever. New Guidelines from the United States suggest that no alcohol is the best option for cancer prevention. https://acsjournals.onlinelibrary.wiley.com/doi/full/10.3322/caac.21591 


COVID-19 and the insurance industry outlook - no, it isn't over...

In April almost everyone I know became an amateur epidemiologist, or at least, COVID-watcher. Today, many of my non-insurance colleagues are blessed with an almost-normal life. We have been fortunate - meaning it is vital to acknowledge that good policy and a little good luck, brought us here. The industry, however, has to take a slightly longer view. So what does COVID-19 mean for us now? 

On a cases per million bases I chose the following visualisation to help show where New Zealand is positioned, and just how fortunate we are. The US and Brazilian data shows how a badly managed response looks. No detailed critique here, you can find plenty elsewhere. 

The World detail in this chart is deeply suspect data. Some countries are so poor they have inadequate resources, some are so badly managed the data is deeply flawed, some are merely bad at testing. Germany shows how a poor start can quickly be converted into a good outcome - on a cases per million basis it is now doing better than Australia which is battling a resurgence in the disease. 

Removing the US, Brazil, and World, allows us to zoom in on the better performers: 

Australia's resurgence is instructive. It proves several things - given that the Victoria outbreak came from badly managed isolation, it was right that media were highly critical of security breaches. Given that it has happened it is right that government has been slow to create travel bubbles. Australia shows how fragile our position is until there is better news on the vaccine front. The longer we can contain the virus the better our chances get. I am still using the much maligned contact tracing app and signing in where I see the forms - even though most people aren't. Why? if someone breaches isolation and there is an outbreak that data is our best chance of avoiding a nationwide lockdown, again, which is proving so damaging to Victoria.

Removing Australia allows us to zoom in again on the best performers (setting aside China). To further reveal differences, I have switched to a log scale: 

 

Japan is battling a resurgence too, not at the level Australia is, but still ten times as many cases as we are managing (all in isolation). South Korea sits in between, just a little worse than us, but with those cases also being in well managed isolation, like ours. Taiwan has half the cases that we do on a per million basis. Vietnam, functionally none - both would be great places to travel agreement with!

For the insurance industry, whole of pandemic modelling remains a concern. A worst-case scenario would commence with a resurgence along the lines seen in Victoria, which breaks out into general community transmission. Choices we make today, could help. During lock down I cursed myself for not preparing better - but how many of us are wearing masks, even if just when we have a cold? Very few, and those are Kiwis with links to China, Taiwan, Japan, or South Korea. How many of us are contact tracing still? Few, yet that data could have helped Victoria avoid a second lock-down.

It is complacency which would undo all the good work of the team of five million, some of whom are hurting a lot from that sacrifice.

There is good news from the UK, US, and China, about potential vaccines. But the disease is still out there waiting for us. If we are to avoid thousands of deaths then we must remain vigilant. That is not a job solely for the government - it includes us. 

Even if we continue to track along the 'best case' scenario - cases only in managed isolation, and reasonably quick economic recovery, we can expect a fair measure of misery for those worst affected: lost jobs, lost homes, and disrupted lives. Those tend to have claims effects - IP claims last longer, trauma claims are deferred, some turn into life claims. 


But are they just little lies?

Stuff has this great article by Nile Bijoux about people being willing to lie to their insurer. Those are general insurers, but it seems a stretch to believe that the same people happy to lie on their car insurance application would suddenly become gravely honest when filling in a life application. Perhaps people don't really think of lying to their insurer as a big deal - so many do it. This is borne out in other markets too - in the UK it is estimated that it adds the equivalent of about $60 a year to every insurance policy. If that margin were applied to the 2.5 million life, trauma, IP, and TPD, policies in New Zealand it would mean about $150 million in fraud costs each year. 


Industry participants react to gastric cancer claim denial, and more daily news

Ailepata Ailepata’s gastric cancer claim denial as a result of a New Zealand Home Loans broker suggesting Ailepata change insurers has caused division within the industry. While some have sided with Fidelity Life’s decision to deny the trauma claim, others have contested the decision. Tony Vidler described the incident as a shocker and hoped it would highlight the duties of advisers by stating that advisers need to act as front-line underwriters since they are better judges of insurer criteria than clients. 

“Vidler said: “Clients often, with the best of intentions, tell you everything they think you want to know then later say ‘I didn’t think that would matter. A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

“I always take the view that the adviser should be the frontline underwriter … if there’s any doubt or questions you’ve got to draw attention to it.”

If there was a concern about something from a client’s past, the adviser could suggest the insurer requested medical files, he said.”

Katrina Church has stated that they isn’t enough information to condemn the advice provided to Ailepata Ailepata by the mortgage broker. Instead Katrina said that in her experience clients don’t usually understand their disclosure obligations. While advisers work to minimise risk of each application but she suggests that advisers consider the question do clients understand what they have to do when applying.

“Church said there was not enough in the articles written about the case to condemn any adviser. “My experience is most clients don’t truly understand what their obligations regarding disclosure are. And as advisers I would ask do we do enough here to help out clients? Are we training this as well as we can in the industry?

“Advisers are the first underwriters and we should do all we can to derisk the situation for clients – this is something that online or applications made direct to providers can't. That’s our point of difference. 

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.” Click here to read more 

In other news:

Financial Advice: Financial Advice formed a group called Corporate Associates

Financial Advice: consultation of the Trusted Adviser mark closed July 22 2020

Financial Advice: Applications invited to be a Corporate Associate

FMA: Kiwis confident financial markets will recover from COVID-19, plan to increase investments


Increase in Australian mental health disability claims, and more daily news

The Australian FSC reported that the number of mental health disability claims made in Australia has increased by over 50% in the past five years. A KPMG report showed that from 2013 to 2018 mental health disability claims increased by 53%, placing it in the top three disability claims.

“Mental health disability claims have soared more than 50 per cent over the past five years, putting strain on an industry that struggled to make any money at all in 2019, a new report commissioned by the Financial Services Council shows.

The report, compiled by KPMG, finds that over the five years to 2018, mental health claims costs rose 53 per cent, making it the third most common category of disability claim, behind accident and musculoskeletal, and ahead of cancer. For men, mental health-related claims were 125 per cent higher than the 2013 figure.”

Regardless of mental health exclusions being in place, mental health claims have increased. KPMG actuarial partner Briallen Cummings has highlighted that the increase is actually just the same people claiming for longer periods of time. Cummings has suggested that the increased number and duration of mental health claims could be a result of the shift in societal perceptions of mental health illnesses.

“The meteoric rise in mental health claims comes despite a years-long effort by major life insurers to introduce preventative mental health measures and programs aimed at getting people back into work.

KPMG actuarial partner Briallen Cummings said there was not actually an increase in the number of claims. Rather, the surging mental health claims bill was a result of the same number of people claiming for longer.

She said this could reflect a profound shift in public attitudes that had seen the stigma around mental health disappear. She said this had caused a "a real change in behaviour".” Click here to read more

In other news:

FSC: Confirmed speakers for Generations Conference are:

  • Rob Everett, FMA CEO
  • Glenys Talivai, Public Trust CEO
  • Mike Woodbury, Chapman Tripp partner
  • Jane Wrightson, CFFC Retirement Commissioner
  • Ryan Bessemer, Trustees Executors CEO
  • Alexia Hilbertidou, GirlBoss founder

Katrina Shanks: a financial adviser gets a taste of her own medicine

FSC: three weeks left for FSC 2020 Awards nominations

Christchurch dad's tumour surgery struggle after arrival of newborn twins


Free cover for customer in financial stress

In a previous quarterly report we highlighted the case of Ms Earea, after having seen the story published in Stuff. Stuff has now published a follow-up to the story, as Westpac Life has waived her premium payments:

“After Earea’s story featured on Stuff, Westpac Life wrote to her to tell her: “No further premium payments will be required from you.”

“We are concerned that you have been making difficult decisions that involve personal sacrifice,” the letter said.

Earea had a $280,000 terminal illness claim declined by Westpac Life last year, with the insurer deciding her medical condition did not meet the criteria under her policy as it was not a condition the insurer believed would result in her death within 12 months.”

“Westpac Life is standing by its decision to turn down the claim, though Earea has sought legal advice and intends to challenge that.

Earea took her case to the Banking Ombudsman, which found the insurer had a right to decline the claim.”

This is a generous decision by Westpac Life which allows Ms Earea to retain the cover which she was finding difficult to afford. The dispute about the claim may be ongoing. We only have the information in the two Stuff stories to consider, so it would be unwise to comment more on that. In general terms, however, insurers asked for claims on compassionate grounds also consider their duties to other policyholders to only pay claims that meet the product terms and conditions. 

Click here to read more


Vulnerable customers

Understanding what vulnerability is, identifying vulnerable customers as well as

considering the needs of your vulnerable customers should be an integral part of your adviser business service. But sometimes this isn’t the case.

Let’s begin by first looking at what a vulnerable customer is. Although vulnerability is difficult to define as well as difficult to attribute, the New Zealand Human Rights Commission broadly defines vulnerable customers as being people who are less likely to cope with and recover from stresses and pressures. Determining vulnerability within the insurance industry is equally difficult to pinpoint. The Human Rights Commission suggests that those working in the insurance industry exercise flexibility to ensure accommodation.

Now that we have broadly defined vulnerable customers, let’s take a look at the proportion of insurance customers that are vulnerable customers. Insurers consistently identified around eight percent of their customers to be vulnerable. That is a significant number. They probably work with advisers in the usual proportions - so you may expect that about 8% of your clients are vulnerable at any given time. With information insurers supplied, the Human Rights Commission was able to generate a suggestive list of vulnerability criteria. Two categories were created. The first category identified that customers can be vulnerable irrespective of other factors. Identified factors are:

  • Health or disability situations
  • Living situations
  • Family situations
  • Age
  • Geographic and or environmental factors
  • Living in non-English-speaking households

Insurance advisers should be particularly concerned about vulnerable customers as most clients that have experienced a claimable event will probably qualify due to health, financial circumstances, and possibly living situation.

In the second category, vulnerability was found to result from intersecting factors. This means that customers are vulnerable not because of one or more overarching

factors of vulnerability, but because several ‘milder’ factors of vulnerability intersect. Identified factors are:

  • Health or disability situations
  • Living situations, including employment, geographic location and dwelling
  • Family situations, including support provided by family, friends or support services
  • The degree of support they provide to other people, especially family members
  • Age
  • Ability to understand insurance policies and processes.

Keeping vulnerability at the forefront of our minds allows us to accommodate vulnerable customers at all stages. The Human Rights Commission notes that consideration of vulnerability can be built into business operations from the point of sale to the time of claim. This works to add value to business by valuing customers and better managing risk.

It is paramount to understand that the same factors can impact people very differently. This means that we cannot state the severity or mildness of a certain factor. It is equally important to understand that people aren’t limited to the number of factors they are exposed to at a single period. In some circumstances, people can be exposed to multiple factors of vulnerability. And lastly, the factors of vulnerability and periods of vulnerability can change over time.

This fits well with the FMA’s view that vulnerable customers are not so much ‘types’ as circumstances.