What if only 17% of people ever went to the doctor?

That would be ridiculous wouldn't it - if only 17% of people went to the doctor when sick. Imagine, most people thinking that going to a doctor was unnecessary. It would be like thinking that a doctor couldn't  really know that much more about how to be healthy, or at least recover from sickness, than you do, so why pay all that money? 

Yet that is what people think about financial advice. It is one of the of the surprising conclusions of this paper from the United States on why people do not seek financial advice. Link

Perhaps you are about to dismiss that as the product of those foolish Americans, known for strange ideas - but the Commission for Financial Capability research shows similar levels of apathy for financial affairs here. Different survey aims and objectives, but very similar results from their survey at this link (especially refer to table three). 

There is no greater enemy to financial well-being than apathy. What we focus on, we can usually find a way to improve. The big debates within the sector tend to be about how to improve. That's valuable and so much earnest energy is expended there. I am part of it and I value the struggle and enjoy it. But I have to keep reminding myself, the really big debate, the one that would make all the difference, is how to get people paying some attention. 


Detailed schedule of Partners Life Product Changes and Benefit Improvements

Partners Life Product Changes and Benefit improvements 

Special Events Increase benefit limits increased from 75% to 100% for aggregated sum insured and new special event added

Counselling Benefit increased “use by” time to 12 months after claim

Financial and Legal Advice Benefit increased “use by” time to 12 months after claim and the maximum benefit increased to $3,000

Special Events Increase deal on offer to customers who missed policy anniversaries. Customers will have a have an additional 12 months added to their 60-day time limit that applies to their immediate past anniversary

Dependent Child Funeral Support Benefit updated to include unborn child age moving to 20 weeks or weighing more than 400 grams

Bed Confinement Benefit added under the daily care of a registered nurse as an alternative requirement

Alzheimer’s Disease, Dementia, Aplastic Anaemia, HIV (medical acquired), Multiple Sclerosis, Major Organ Transplant, Diabetes definitions changed in Trauma Cover

Non-surgical Benefit (Private Hospital and Serious Illness Benefits) annual limit increased from $300,000 to $500,000

New Public Treatment Top-Up Benefit means Partners Life will pay for some treatments after customer has covered treatment in public system.  

$5,000 maximum limit removed for Second Opinion Benefit (Private Medical Cover)

New cover for mental health consultations has a maximum of $2,500 under Surgical and Non-surgical Benefits (Private Hospital and Serious Illness Benefits)

Optional Specialists and Test now includes Podiatrist as a specialist for consultations

Cancer definition simplified in Excess Waiver Benefit.

 

Income and Expenses Cover

Income and Expenses Cover is designed to include sustainability features, remove over-insurance and moral hazard opportunity, and provide customer support

Benefit is the greater of pre-disability income less offset x 75% of life assured’s share of pre-disability monthly domestic expenses

The cover term for Income Cover and Expenses Cover is to age 65 with payments term options of 2 years, 5 years and to age 65

Pre-disability income is the same as Income Cover

Disabled for occupation classes 1-4 includes 10 hours or 75% of activities but it moves from own to reasonable occupation after 12 months

Customers will be considered to be in occupation class 5 if they have been unemployed, on unpaid leave, working less than 25 a week, incarcerated in a penal institution, or legally barred 12 months before disability

Income Cover offsets apply to Income Cover and Expenses Cover

Income and Expenses Cover has a payment term restriction that applies for medically unevidenced claims. These are not a fixed restriction for mental health claims

Unevidenced claims in the Income and Expenses Cover are paid for up to 12 months

Fixed payment terms reset for new disability for the Income and Expenses Cover, although customers must be back to full time work for more than 12 months to reset.

Disability within 12 months of claim for any reason is a recurrent disability

Income and Expenses Cover ancillary benefits include Bed Confinement Benefit, Return to Work Benefit, Increasing Income Benefit, Recovery Support Benefit (reduced to 6x SI), and Vocational Retraining and Rehabilitation Benefit (reduced to 3x SI or max $10,000)

Income and Expenses Cover ancillary benefits don’t include Lump sum TPD, Critical Illness Benefit, Specific Injury Benefit, Child Care Assistance Benefit, Death Benefit, and Return to Home Benefit

YRT option only applies.

Moderate Trauma Cover

Partners Life desires to get back to the principle of indemnification meaning that customers don’t need claims paid unless they have financial losses, and they don’t need to pay premiums that doesn’t indemnify against loss

Moderate Trauma Cover allows price efficiency, cutting out claims with immaterial financial consequences. This enables customers to afford higher sums insured.

Moderate Trauma Cover will mean future prices will be sustainable and will allow advisers to fine tune severity based on trauma solutions

Moderate Trauma Cover will have more defined conditions for Alzheimer’s Disease, Dementia, Aplastic Anaemia, Angioplasty, Blindness, Cardiomyopathy, Chromic Kidney Failure, Cancer, Diabetes, Heart Attack, Intensive Care, Loss of Cognitive Function, Motor Neurone Disease and Muscular Dystrophy, Multiple Sclerosis, Severe Rheumatoid Arthritis, Stroke.

Designed to be 20% cheaper than Trauma Cover (TC), price differential expected to grow

Designed to be a mid-range trauma cover (between TC and Serious Trauma Cover)

No built-in TPD, customers that need TDP will need to take TPD Cover.

Moderate Trauma Cover can be combined with TC and STC to create a severity-based trauma option.


Life expectancy change over time

It is always worth reconnecting with this great story from time to time: humans have been able to increase life expectancy dramatically in the last 150 years. It is not, of course, a one way proposition. Poor management, disease, bad luck, and war can have an effect - even in modern times: take South Africa as an example. This long-run analysis flatters some recent challenges. The United States, for example, is in a period where due to poor healthcare and high levels of violence life expectancy has stopped growing. New Zealand's life expectancy is great - and yet we could still save hundreds of lives every year if we could just improve our performance in five key areas to the levels that are typical in several other OECD countries. I suppose that is what makes this journey exciting: there is still so much more room for improvement. 


Home ownership rates and the impact on life insurance

Home purchase has been a major driver for bringing new households into comprehensive insurance planning. Fewer, older, homeowners, reduces the numbers in that pathway to cover considerably. Some flow remains, but the people are older, and more likely to have gained some coverage through other pathways. Financial advisers have been more flexible in identifying prospects through other life events such as immigration, starting new employment, and the birth of a child. They have also been more adept at offering insurance to renters. 

Household budgets under pressure from the increased costs of housing have less room for expenditure of all other types. 

Increasing debt levels are usually well correlated with increasing levels of coverage, so this is a broadly positive for insurance, but balanced by the budget issue, which is reducing the share of households with mortgage debt, and increasing the share renting. 

Home ownership rates av in Dec 2020


Wellbeing timeseries explorer

Statistics New Zealand has a fascinating data explorer for wellbeing - you can find it at this link. For those of you interested in the impact of COVID, you're out of luck as the most recent period included in the survey was for 2018. The two prior periods were 2016 and 2014. It is worth a look. Some things are reassuring - others more worrying: such as the metrics for houses being cold in the winter or for loneliness. 


Stats NZ update data collection approach relating to sex and gender

Stats NZ has revealed that after conducting an extensive public consultation there will be a change to the statistical standard relating to how gender, sex and variations of sex characteristics data is collected and reported. The new standard will ensure that definitions and measures are consistent and that they are inclusive of the transgender and intersex population. Stats NZ has also revealed that the collection and reporting approach is based around a human rights approach.

“An updated statistical standard will inform how agencies collect and report information on gender, sex, and variations of sex characteristics, Stats NZ said today. 

The refreshed standard makes definitions and measures consistent, provides guidance for collecting transgender and intersex population data, and is grounded in a human rights approach. 

“It’s important we collect data in an inclusive way, and our process for developing the updated standard reflects this. The refresh has involved extensive public consultation, input from government agencies, international peers, and the support of subject matter experts,’’ Government Statistician and Chief Executive Mark Sowden said.” 

Advisers and insurers also collect sex and gender information. It would be good to see the same standard applied in order to allow data sets to be compared effectively. A graphic from the Statistics NZ guide is shown below to illustrate how to ask the relevant questions. It seems that for the purposes of insurance data collection the approach recommended is to ask sex as assigned at birth and also then to ask gender (as shown in the third part of step three). When underwriting cover, however, identification of intersex variations would appear to be important. Moving these from the health questionnaire to the part of the application where sex and gender questions are asked would help some respondents a great deal. This is illustrated by the additional questions suggested in step three below.  Statistics NZ Guide to collecting gender sex and variations 2021-04-29 143507
 

 
Visit our website to read this news story and the updated standard:


Merely stating facts is not enough

In research covering more than 6,000 claims for trauma conditions across greater than 2.6 million policy years, recorded claims causes show that cancer accounted for more than 40% of male claims and more than 70% of female claims. That's a huge share. It astonishes me that claims cause was not recorded for over 1,500 claims - but this gap in the data is more likely to be due to poor /legacy management information systems, than actually paying claims without a cause, it is unlikely to affect the ratio of claims causes. 

Consider another pair of facts: in a 30 year period a male non-smoker may have about a 16% (or one in six) chance of claiming on their trauma policy. Trauma claims enjoy a high claim payment rate - it varies, but in the UK a figure of greater than 90% is common. Now consider how they interact: there is about a 1.6% chance that this person will be unable to make a claim. Trauma insurance is a good bet. 

Clients, living their lives, have little or no idea about the risks and odds. It is up to someone to tell them. What's more, if you are basing product selection decisions on long lists of things that have little or no bearing on whether a claim will be payable then the information is true, but of limited use. Weighting the features by claims likelihood is essential to helping the client make an informed decision. 


Legal and regulatory review for the life and health insurance sector

22 Apr 2021 – ASIC released its set of expectations of life and general insurers following a review of insurers’ responses to consumers experiencing financial hardship during the COVID-19 pandemic. This and vulnerable client issues are likely to be covered by the FMA over the course of the year so these expectations are well worth reviewing. https://asic.gov.au/about-asic/news-centre/news-items/asic-sets-expectations-of-life-and-general-insurers-following-a-review-of-insurers-responses-to-consumers-experiencing-financial-hardship-during-the-covid-19-pandemic/

22 Apr 2021 – Department of Internal Affairs released its AML/CFT Regulatory Findings Report 2020 together with its targeted compliance assessment on reporting entities’ policies, procedures and controls for relating to politically exposed persons (PEPs). Weblinks follow:

https://www.dia.govt.nz/AML-CFT-Regulatory-Findings-Report-2020-available and https://www.dia.govt.nz/AML-CFT-Targeted-Compliance-Assessments

22 Apr 2021 – Government, Treasury and the RBNZ advised that a Cabinet decision to adopt the final measures resulting from the Reserve Bank Act Review will see drafting commence for new legislation to be known as the Deposit Takers Act. This Act will create a single regulatory regime for all bank and non-bank deposit takers (such as building societies and finance companies). It will also introduce a new deposit insurance scheme that will protect up to $100,000 per depositor, per institution in the event of a failure. Relevant weblinks follow:

https://www.beehive.govt.nz/release/deposit-taking-measures-protect-financial-stability-and-new-zealanders

https://www.rbnz.govt.nz/news/2021/04/new-deposit-takers-act-a-step-closer

https://www.nzba.org.nz/2021/04/22/deposit-guarantee-scheme-provides-extra-security-for-depositors/


Legal and regulatory review for the life and health insurance sector

19 Apr 2021 – Dentons Kensington Swan advised that the international Financial Action Task Force (FATF) had consulted private sector stakeholders on an update to FATF guidance on the risk-based approach to virtual assets and virtual asset service providers, with consultation having opened on 19 March 2021 and with submissions closing on 20 April 2021.

https://www.fatf-gafi.org/publications/fatfrecommendations/documents/public-consultation-guidance-vasp.html

20 Apr 2021 – APRA and ASIC released a Life Insurance Claims and Disputes Statistics publication, covering a rolling 12-month period from 1 January 2020 to 31 December 2020. https://www.apra.gov.au/news-and-publications/apra-and-asic-publish-latest-data-on-life-insurance-claims-and-disputes-3

21 Apr 2021 – FMA media release stating that it was warning the funds management industry to avoid advertising large investment returns for the 12-month period to March 31, 2021, as this could mislead investors. https://www.fma.govt.nz/news-and-resources/media-releases/advertising-investment-returns-could-mislead-investors/

21 Apr 2021 – MBIE opened consultation on outstanding aspects of the upcoming regime governing conduct in the financial sector, including consulting on regulations covering matters such as requirements for claims handling and complaints processes, prohibitions of certain types of sales incentives, and the treatment of intermediaries, with submissions closing on 4 June 2021. https://www.mbie.govt.nz/about/news/consultation-opens-on-additional-measures-in-new-financial-conduct-regime/

21 Apr 2021 – Parliamentary website updated for the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, showing submission closing date as 28 May 2021 and report date as 16 Aug 2021. https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_109905/financial-sector-climate-related-disclosures-and-other

21 Apr 2021 – IRD advised that it has identified several errors in the recent special report on the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021, and is currently in the process of updating it. An updated version will be published by early next week. https://taxpolicy.ird.govt.nz/news/2021/2021-04-21-updates-required-special-report