Lifetime wealth and insurance

So many New Zealander's feel that they may never have enough lifetime wealth (see this article by Rob Stock at To focus on the positive: at least they are thinking about a good question. How much money is required to life out the rest of one's days is the number that underpins most strategic financial planning. It's the node which links planning for life and disability insurance to planning for retirement.

Most people in the financial services industry have several ideas about this number: a kind of rough rule of thumb, some assumptions about what should or should not be included, and then a much more detailed number they have worked out in their own case - and therefore a clear idea on how to do so. Most other people, unless they are working with a good financial adviser, haven't got that far. Just trying to work out the number generates the right kind of context to work on all sorts of financial planning questions, which is one of the reasons this question is such a good one to address.

For those of us with a strong interest in life and health insurance, it is interesting because that figure for lifetime wealth is essentially the amount of money required in order to never need to earn an income again. That's a circumstance broadly equivalent to total and permanent disablement. It is also a guide to the level of wealth at which insurance may no longer be required - although it may still be desired, in order to protect that wealth.

Of course, it is slightly more complicated in many risk planning situations. Costs can be higher in the case of disablement compared to retirement, but the time horizon may be shorter - as those with chronic health conditions affecting their ability to work have lower life expectancy. In the case of the death of a family member future financial requirements are affected by both the loss of income and the loss of expenditure by the deceased. Variations abound. When financial planners talk about their approach to calculating this number I like to hear the details of how they calculate the amount, and intrigued to hear if they consider age-adjusted life expectancy in the process. If you are interested in further discussion on this do let me know, I have a number of resources available to share. 

Why many women arrive at retirement financially worse off than men

Women arrive at retirement 18% financially worse off than men, on average, they also tend to live longer. Research commissioned by CFFC states that there are more than twice as many women as men living in poverty post age 65 - 14% females compared to 6.6% men. This is a long-run legacy of two features - the interruption to earning from having children, and the gender pay gap. In some Scandinavian countries, both parents take time off for the birth of a child (not necessarily at the same time) and men are more likely to become an at-home carer if that is the option parents go for. Hopefully, other changes can be made - although a gender pay gap persists, it is narrower in New Zealand than many countries. Click here to read more. 

'Threat multipliers' that turn personal crises into financial disasters

This article by Rob Stock for tells the story of one mans unfortunate run of bad luck which financially ruined him. Stock discusses "threat multipliers" and gives his golden rules for reducing them. This scenario underlines the need for an integrated view to be taken of financial planning: these situations show how debt, savings, health, work, and insurance all connect to make a situation either fragile or more resilient. 

Click here to read more. 

Money Week

This week is Money Week and this years theme is 'Now we're talking'. The aim of the campaign is to get people to open up and start talking about money with partners, children, friends and of course, advisers. 

Here is a link to the official Money Week website set up by Sorted which discusses why people should be talking about money and some of the negative impacts keeping money issues to yourself can cause. 

Financial Advice NZ have created this video stating that good things can happen once people starting opening up and discussing money, encouraging Kiwis to talk to a financial adviser. 

28 product and pricing changes this year - the market does not stand still

It has been a very busy year and below is a summary of the pricing and product changes so far in 2019. We keep a running record of all the changes - in our pricing and product comparison databases, and report in detail on the most significant changes in the quarterly life and health reports. You simply cannot assume that you are familiar with the product and price competitiveness of the market. You need to keep checking, because it keeps changing.

Changes 2019

Congratulations to Pinnacle Life on being granted a digital advice exemption

The FMA has granted Pinnacle Life a digital advice exemption. Congratulations to Gillian Vaughan and her team, in particular Amy Cavanaugh who has been driving this project forward. From the media release:

General Manager Operations Amy Cavanaugh says the provision of digital advice will extend Pinnacle Life’s existing online service to customers, offering a flexible approach to personalised advice.

“We know our customers are busy people, so we thought about how we could provide advice in a flexible, personalised, easy-to-access way. The new digital advice platform we are developing will enable customers to make informed decisions about insurance through tailored, real-time digital advice, whenever and wherever they want it.

The Chatswood team has been privileged to be a part of this project. Our prior contributions to online processes have tended to be data services. This project is a further step forward as it has been for a personalised digital advice process. I would like to recognise Shaun Dowler, who provides data science consulting as part of our team has been particularly valuable in pushing ahead this work for Chatswood. 

The announcement says that the service will be launched later this year. 

Risking everything: how New Zealanders view risk, what they are doing about it

The FSC launched "Risking Everything" this morning 

There is relatively little insurance consumer research done in New Zealand. Much of it is of a low quality. The Massey work on underinsurance, by messrs Matthews, Birks, and Naylor, commissioned by the FSC, and this new research, also commissioned by the FSC have to rate as perhaps two of the most important studies. About three years ago we had some really useful work done in income protection - also done under the auspices of the FSC. 

But back to this work. In this case the research is entirely consumer focused, and draws on attitudes towards risk, and the extent of preparedness to face an event. It feels more relevant to me, as the answers to these questions are firmly rooted in the consumer's own perception, rather than concepts that the industry thinks about - like measuring under-insurance against our own models of what people 'should' have. 

These are my personal highlights: 

  • "Those surveyed identified global risks, natural disasters, loss of income/increase of expenses and illness or death when they were asked to consider
    types of risk. However, when thinking about these risks, 1 in 3 of those who identified them don’t tend to think about how these risks might affect
    them and 43% of respondents often forget about them if they do." That rings true, when I think of the attitudes of people not in the industry
  • "The risk of losing their income is not even considered by most New Zealanders." - Is that self-deception? Is that a purposeful decision because they are unaware that a solution exists?
  • "Two-thirds of those surveyed thought that there was a moderate to high risk of major financial problems should a significant event happen such
    as serious injury or being unable to work" - which is a powerful point of self-reflection. So, if you are brave enough to stand on the street and ask questions (as the film crew below did) then two-thirds of people will admit that they probably have a problem that needs solving. There's a need, and an openness. 
  • "I dislike having to think about these financial impacts" - now that's an honest response, who does like thinking about it?
  • "Respondents aged 45-54 and those with a large family (three or more children at home) were less likely to think about financial risk" I bet that's just because they are so busy, but as the researchers found out, if you do ask, you get some good answers. 
  • There is also a lack of knowledge about what to do: "I’m not really sure how I should manage these potential impacts" or should I say, these people are all but asking for advice
  • Winder financial planning issues are identified, with 40% knowing that they do not have the financial resources to manage for three months without their income. 
  • Yet with all that latent need, only 38% of respondents have an insurance policy, and only 8% looked into buying one in the last two years (this number excludes those that might have reviewed their cover.

There is a wealth of information. You can download the report from this Download Financial Services Council - Risking Everything - June 2019, the FSC's media release is Download FSCMediaRelease KiwisGambleonFinancialRiskFInalJune102019, and there are some cool vox pops below. Do check it out.


Thoughts on Susan Edmund’s Starting out Starting over

Susan Edmund’s Starting out Starting over is made up of different chapters that are dedicated to the different stages of a single woman’s life. Edmunds’ ability to simply relate finance to the lives of single women works to capture and hold the attention of readers. When beginning the book, I was a little worried that I would be left feeling overwhelmed, but Edmunds tackles the broad and complex topic of finance in a manner that is easy to follow, thought-provoking and entertaining. Her ability to address issues relating to debt, home purchases and other investments, love, insurance, and retirement worked well to offer readers a complete guide. Focusing on areas that are generally major events in any person’s life helped to put a lot of things into perspective.

A theme that ran throughout the book was the incorporation of case studies. All case studies worked to further illustrate a point that Edmunds was trying to get across to readers. Although the points were easy to understand, the use of cases studies made the book more personable. I found that aspects of the characters described throughout the book either related to people I know or myself. Although alarming at times, these case studies helped me to objectively assess my tendencies and experiences and to quietly evaluate the tendencies, current situations, and past experiences of women close to me. Upon completion of the book, I felt that the case studies served a dual. The first was to illustrate points made, and the second was to help readers examine their situation, experiences, and habits. I believe the use of case studies is a well-thought-out and a well-designed approach.

Another aspect that I found highly effective was the simple exercises that readers could complete. Through the integration of activities, I was able to use the material that I was reading to critically evaluate my situation and my mindset. Although difficult at times, this aspect of the book is what I found to be most helpful. Having these questions throughout the book meant that I was able to honestly answer without fear of judgment.

To conclude, Susan Edmund’s Starting out Starting over is an informative book that helped me to better understand finance and to be brutally honest with myself. I was able to better understand financial elements that are key to having a successful financial standing. Edmunds straight-forward approach worked well to get her points across in a manner that leaves readers aware and hopeful.

Review by Jerusalem Hibru. Image of Susan Edmunds, supplied.

Susan edmunds



Countdown begins to Towards Wellbeing conference

Only a couple of weeks remain until early bird ticket sales for Towards Wellbeing conference end. The conference will be held on 11-12 September at the Pullman Hotel in Auckland.

The full-day event will begin with breakfast at 7.30 am and the main platform welcome will start at 9 am. Attending the conference will allow attendees the opportunity to network with around 500 insurance specialists and hear from over 70 speakers discussing current industry-related issues.