Chatswood and Quality Product Research - working from home

The team are all working from home. Our normal office phone number will be picked up on a redirect to one of the team and messages cleared if we are unable to answer immediately. Your best approach to reaching us during the lockdown is to email, or call our mobile phones. We are happy to help, also, during the first day or two staff may not be quite as quick as we normally are to respond. We appreciate your patience if that's the case. We hope you all have a safe and short lockdown!


Legal and regulatory review for the life and health insurance sector

5 Aug 2021 – As part of Money Week, the Insurance Council of NZ released consumer survey results which show a disturbing lack of understanding of insurance by New Zealanders. https://www.icnz.org.nz/media-resources/media-releases/single/item/just-wondering-how-well-do-you-understand-your-insurance

9 Aug 2021 – Council of Financial Regulators announced that the RBNZ and the FMA will be working together to conduct a cross-sector thematic review on governance, covering banks, insurers, non-bank deposit takers and investment management firms. The review will focus on the boards of regulated entities and their ability to effectively govern and provide oversight. https://www.rbnz.govt.nz/regulation-and-supervision/thematic-reviews/cross-sector-thematic-reviews


Vaccination: it's worth it

Two charts show how vaccination is going and why it is so important. This first shows how we are progressing. Unless you have been living under a rock, you probably know this is only just accelerating now. But the main purpose of this post is to include this figure as context, not a conclusion in itself. The second chart shows the case fatality rate, and how fast this is dropping for the countries with high rates of vaccination. 

I've removed a few of the countries in the middle. It's well worth mousing over the chart to explore specific data tracks and points. If you look at the most recent points you see that in high-vaccination countries case fatality rates are now well under 1%. Not all of this is due to vaccination, there have been some advances in treatment too, but most of it is due to vaccination - a fact you can explore yourself by examining the relatively poorer performance of the countries with COVID-19 in the community with low rates of vaccination. Taiwan, for example, was, like us, quite successful at early control measures - although higher than us, their vaccination efforts are still slow when compared to say Canada or the UK, and case fatality rates are high. 

On a personal note I am really looking forward to my first jab on Wednesday. 


A failure of product design - TPD benefits

Several advisers have been writing to me over the last few months with issues with TPD benefits. I have also conducted a review of TPD benefits recently for a client. Several aspects of TPD design have come into focus through the process. Two that stand out are variations in loss of independent living features, which are usually based on activities of daily living (ADLs).

Almost all companies have five activities. At first glance these appear very similar. Closer inspection shows differences. The first is that the walking definition of some is not fulfilled if the insured person can get about in a wheelchair, whereas with others it is fulfilled if the insured has to use a wheelchair. The second difference is that independent existence requires the assistance of a person to help the insured, which is not fulfilled if technology can help. 

Although I have not done the research, I am willing to bet that consumers believe that if you are confined to a wheelchair that would indicate a claims payment would be made. In fact, to be fair, it probably does pay out most of the time: as in most cases the claim would qualify under other factors. But claims do exist where the decision will hinge on this one fact - and I think consumers would expect the cover to consider you sufficiently disabled if you needed a wheelchair to get about (assuming the other conditions were met, of course, such as this being permanent - not merely temporary). In fact I saw the details of one such claim yesterday. Likewise with technology: the rapidly improving situation with technology means that someone who could not walk at all may be able to buy a set of robotic legs that enable them to walk. Here are examples: on in the US, another using technology developed here in New Zealand

Individually these are interesting issues - and should be resolved - but collectively they indicate both a communication and product development challenge. The communication issue is how we get across to customers what we mean by loss of independent existence. We cannot simply allow a situation to exist where we allow our different perceptions of what is meant to exist. At best, that's simply too sloppy,  at worst, if it is done knowingly, then its a form of misrepresentation of what the product does. The product development challenge is to work out what consumers need and deliver a product that does that. Robot legs do not come cheap - I suspect that consumers want a policy that will pay for them, not fail to pay out because of them. In product design that means some hard work has to be done. That means literally testing scenarios and descriptions and working out what level of cover is needed, how to communicate about that cover, and building the wording and pricing up from there. Then launching that and successfully demonstrating how much better that product is compared to the rest. There is definitely room for improvement. 


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.