Product scores for income protection products are under review. We need to consider how to take into account temporary measures being applied to contracts with some disablement components - IP, Trauma, and TPD - such as the recent restrictions being applied by Partners Life. In the meantime, you need to familiarise yourself with what those restrictions are and whether they apply to the cases you are submitting. We have a schedule of COVID-19 impacts available for subscribers in the quarterly life and health review, which will be issued today.
The Quality Product Research database V130 has now been distributed to all subscribers. This version includes the following changes:
- Southern Cross and nib added to Standalone Trauma
- Partners Life documents and rating update V14.5 – effective 09.12.2019 (personal and business)
- Fidelity Life remediation of booster benefit
Asteron Life have announced a number of changes to their Mortgage and Living Cover, as well as the ability to quote it alongside Income Protection.
As of Monday 9 December Asteron announced they have introduced:
- The ability to combine Mortgage and Living Cover (MLC) with Income Protection (IP)
- An optional Ten-hour benefit on Mortgage and Living Cover
- Enabling bundling discounts across Personal and Business
- Adding level Life Cover projections to age 100
Here is an example of combining Mortgage and Living Cover with IP: Combining MLC and IP may be suitable for clients who want the advantage of not offsetting ACC benefits as well as some tax deductibility of premiums; or for self-employed clients who could manage basic oversight of their business in less than 10 hours a week; or for self-employed clients who are used to meeting regular tax obligations.
Here you can download a case study helping explain the optional ten-hour benefit on Mortgage and Living Cover. Download MLC Case study
Partners Life has an impressively long list of policy wording changes made. Arguably, each of the individual items is small, and some merely clarify, but in sum the changes are significant, and clarity is good and should always be an aim. I particularly liked the change to the intensive care benefit, as an example, as I saw a particularly unfortunate claim where the client failed to meet the strict definition, but should have qualified. This change makes that unfortunate circumstance less likely. I also liked the changes to definitions of income and full time. The addition of the change to include removal of a major portion of the colon is a valuable addition to the loss of a major organ schedule, and increasingly common in the case of bowel cancer.
You can find full details of the changes at this link here.
Partners Life have released this video summarising some of the most significant product changes made effective 9 December.
QPRV12_9 is now live, this version includes the following changes:
- Updates to policy documents and ratings for the below:
- Accuro SmartCare ACC7124 08/2019
- Accuro SmartCare+ ACC7125 08/2019
- AMP RPP NZPD00291 TraumaPlus 2017
- AMP RPP NZPD0305 Trauma 10/2019
- Asteron Continuous Trauma accessible through TBB
Katrina Williams, writing for stuff.co.nz has a piece on how life insurance companies may have to decide how to cope with the new End of Life Choice Bill if it becomes law.
The first thing to be clear about is that life insurers are bound by their current contracts in the marketplace. I don't think that the article is as straightforward about this as it should be - it therefore raises doubts about claims payment under current contracts that are not really there. As one insurer in the article relates, most insurance policies cover suicide provided that the policy has been in force for at least 13 months and there was no evident intention to defraud the insurer.
Another point to note is that end of life choice typically happens in old age. Although the debate about euthanasia tends to highlight extreme cases - like cases of severe illness in younger people because of the tragedy of them - these are rare. When you examine these cases more closely they are often (although not always) as a result of long-pre-existing disorders, sometimes congenital. Few such people own life insurance, and few people hold life insurance into very old age where most end of life choices are likely to be made. The actual number of policies affected is likely to be small, and in most cases, these claims are being met already under payments for terminal illness, and eventual death, whatever the exact cause.
Insurers are conscious, also, of the risks of commenting on a subject where views vary considerably and feelings are strong. The business of an insurer is insurance, not political advocacy. Whatever the views of individual executives might be, their shared project is the business, and they are conscious of that particular, defined duty to their clients. That is evident in Richard Klipin's response, as CEO of the Financial Services Council:
"The life insurance industry and individual companies will work in a careful, considered way to review policies to ensure that they remain fit for purpose, in line with international best practice, and continue to provide the support and coverage that New Zealanders expect,"
There are wider implications if the Bill becomes law. Product design must consider moral hazard, which may be slightly elevated in the case that a decision to end one's life is more acceptable and legal. These challenges, however, are usually successfully navigated in this market, as they have been in other markets. The existing moral hazard of the incentives to fraud and murder are very well managed by New Zealand insurers through the underwriting process and through the law. There are many issues to consider in the End of Life Choice Bill debate, but how insurance may operate is not the most important.
Click here to read more.
ASIC has stated disclosures have been assumed to inform consumers to make good financial decisions, but in the real world they are much less effective than those writing them might have wanted them to be. I am sure that most people do not read the PDS. Likewise, most people don't read their insurance policy documents. They are too long, and customers are probably assuming that they would find it too hard to understand. They are probably correct in that assessment.
This is an immensely difficult area - because in an intangible purchase the contract is very, very, important. This is also a problem not limited to insurance: increasingly intangible services come packaged with legal agreements that are dozens of pages long, that would be read by fewer than one in a hundred people. Did you read the updated terms and conditions for the Apple Store when they popped up last? What about the terms for Amazon Prime? Instagram? Seemingly small differences in contracts can have large impacts on claims: consider how hard it is for a consumer to properly understand the difference between income minus offsets multiplied by 75% and 75% of income minus offsets.
What is to be done?
I don't agree that the contract is meaningless. We cannot issue insurance without a contract, and the contract has to mean something. We can't have a contract based on what the client wishes they had bought at the time the claim arises. This is a complex problem for which there is no one answer, but several strategies working together in concert. Consumers can buy complex packages of services and contract with confidence when these are all deployed together. Plain English policy wordings help. So do minimum standards, so it is valid for regulators to ask the question about products with very low rates of accepted claims, and low claims as a proportion of premiums. Policy comparison tools are important too in helping to shine a light on the most important features and clauses (of course I think that, owning half of Quality Product Research Limited). Advisers have a particularly important role to play: in explaining the likely terms, providing examples of how the policies work in the real world, and through past claims experience, showing confidence in the claims paying intent behind each policy. New technology and new attitudes can work wonders as well: automating some aspects of the claims process would be marvelous.
Click here to read more about the ASIC statement that sparked these thoughts.
We have just distributed the latest product research database update (QPRV12_6). This version includes the following changes:
- AIA - Changed Credit Rating and Agency
- AMP - Changed Credit Rating
- MAS - New policy wording for Life, TPD and Trauma
- AMP Lifetrack - New policy wording changes
- Fidelity - New policy wording - no rating changes
- Add new Product Line Wellness to take AIA Vitality into account. This will appear on the Package score on QuoteMonster research if AIA Vitality is selected
Advisers with AIA agency agreements will already have received many details - a commendable level of detail - from AIA in advance of the launch of their new AIA Living offer. I will only summarise it here for news purposes:
From 5 August this will be AIA's Living range:
- AIA Living Life Cover
- AIA Living Family Protection
- AIA Living Accidental Death
- AIA Living Critical Conditions
- AIA Living Progressive Care
- AIA Living Total Permanent Disablement
Income Protection Insurance
- AIA Living Income Protection
- AIA Living Mortgage and Income Protection
- AIA Living Business Continuity
- AIA Living Rural Continuity
- AIA Living Business Income Support
- AIA Start-Up Income Protection
- AIA Private Health
- AIA Private Health Plus
Accidental Injury Insurance
AIA Living Accidental Injury Cover
That omits certain less-used products, such as the 'essential' version of IP and Trauma, and the specialists and tests add on (when not part of medical).
The multiple benefit discount is significant:
Our new tiered Multi-Benefit Discount will apply to AIA Living risk products (excluding health) based on the number of products held by the customer:
- 10% for two products;
- 12.5% for three products; and
- 15% for four products.
The Multi-Benefit Discount applies within product category levels: Life, Income Protection, Trauma, and TPD. i.e A customer who purchases Life Cover, Loss of Earnings, and Mortgage and Income Protection will receive a 10% discount on the basis that Loss of Earnings and Mortgage and Income Protection fall within “Income Protection” product category.
To qualify for the Multi-Benefit Discount, customers are required to hold a minimum $100,000 Life Cover plus a minimum $75,000 Trauma, $75,000 TPD, or $2,000 (monthly benefit) Income Protection.
This is added to any Vitality discount, which could be 10%. It will be interesting to do comparisons with both discounted and un-discounted premiums.
Commissions have also been updated. I won't repeat the entire schedule here, but I will be updating the commission comparison in the next week, (available to institutional subscribers) if you are keen to see the impact. One thing worth highlighting from that change is the removal of any links to persistency and production levels. Asteron Life has recently made a similar change, and I expect that all commission systems will no longer have these links in the future. AIA's comment is below:
We have taken the view that volume and persistency related commission bonuses drive unnecessary complexity and risk distracting attention away from the important work that Advisers perform for their clients.
Product enhancement pass-backs are also being extended across the range - to older AIA contracts:
We are also pleased to advise that we have extended the AIA pass-back benefit to include all risk policies (Life, Trauma, Income Protection, and TPD) issued from 1 June 2001. Previously, the pass-back benefit applied to policies issued since 1 January 2003.
That comes at a cost for some holders of older trauma policies, who will have a series of premium increases to bring their premiums into line with more recent contracts.
Replacement business rules and details about how to do quotes were also included.
An absolutely huge couple of weeks of changes:
- Updated OnePath Mortgage Protection Prices effective 1 July
- Updated nib health prices effective 1 July
- Updated Southern Cross health prices effective 1 July
- Updated Asteron Life and Trauma rates effective 1 July
- Needs Analysis – added Standalone and Accelerated options for existing Trauma and TPD insurance
- Research report – added a new page at the end explaining the QPR Research methodology
Completed a big set of changes, with some quite substantial shifts (see more posts later today and next week)
- OnePath - Income Protection, Mortgage Protection and Trauma - changes in entry ages
- OnePath - Income Protection - age limit changed