Incentives for the right behaviour, and more daily news

Victoria University’s Economics of Disasters and Climate Change Chair Ilan Noy made a few suggestions when addressing Insurance Council members. To begin Noy pointed out that insurers could incentivize more clients to take out policies by introducing products that offer a greater scope of cover.

“Victoria University of Wellington’s Economics of Disasters and Climate Change Chair Ilan Noy said that, at the moment, insurance doesn’t realistically incentivise risk reduction as much as it needs to. He says part of this needs to happen through lobbying the government to make certain changes, but also potentially providing new products with an increased scope of cover.”

A common issue faced by clients during the lockdown was confusion over their cover limits. To minimize confusion, Noy encouraged insurers to either introduce new products or adjust current risk limits.

“Noy says insurance can also incentivise customers to directly reduce their own risk, and its other crucial role is improving and speeding up recovery from an event. He says a major problem during the COVID-19 pandemic has been confusion over limits of cover, and this may need to be remedied with new products or adjusted risk limits.” Click here to read more

The question of directly incentivising behaviour that reduces risk is always vexed. There are two main levers for providing feedback on risks that are controversial: the first is the willingness to offer cover or not, the second is the price for cover. These are strong, market-based, mechanisms which are employed all the time. A I know of a couple who first took proper control of their adult onset diabetes when they were deferred for cover by an insurer - it suddenly became real for them. I also know that insurers are routinely criticised for not offering cover to people they deem uninsurable as this is seen as 'unfair'. I also know that when insurers charge more for certain risks - for example, housing in coastal districts and earthquake zones - they are again criticsed heavily for a lack of 'fairness'. In a country where we have made desperately slow progress on climate change this price signal should be celebrated. 

The link between product design and incentives also reminded us to link to the question of IP pricing and product design - see below. 

Price is an incentive. In many activities, it is time to pay attention to it.

In other news:

Fidelity Life: two roles in the design team are being advertised  

FMA: Head of Banking/Insurance role being advertised

FMA: FMA publishes derivatives issuer Sector Risk Assessment

Should we be warning consumers about IP prices?


Daily news update: Cigna price changes introduced, and more stories

Cigna has made price changes to a number of products. The range of the changes are detailed in the table below. You can tell from the variety of changes that this is a complete repricing exercise - not merely an increase or decrease of a blanket percentage. Some prices will be much more competitive. Some segments are being increased. The only way to know for certain, is to do a comparison for each life. That's why a price comparison across the market is vital if you wish to offer help to clients seeking the most competitive products. Quotemonster still offers free price comparisons for financial advisers with an FSP number and an email account. 

YRT Life

11/05/2020

From -12% to +8%

Level Life

11/05/2020

From -24% to +1% Non-Smokers & Female Smokers, from -17% to +8% Male Smokers

Trauma

11/05/2020

From -13% to +10% Non-Smokers & -3% to +15% Smokers

Level Trauma

11/05/2020

From -16% to +10% Non-Smokers, -16% to +18% Smokers

Income Protection

11/05/2020

From -1% to -2%

Mortgage Protection

11/05/2020

From + 5% to +25% Female, from +7% to +20% Male. As per discussion, indexation was previously offered free for the first year.

In other news:

AIA: Mentemia, a mental wellbeing app, is now part of the AIA Vitality program.

AIA: Clients can get one month’s premium free when they apply for a new eligible AIA policy between 5 March 2020 and 31 May 2020 and have the policy issued by 31 July 2020.

Partners Life: The automatic COVID-19 Mental Health exclusion that was applied to disability and business risk benefits has been replaced with more targeted and specific underwriting processes.

Partners Life: Clients who had the automatic mental health exclusion applied will have it replaced with an emergent mental health exclusion.

Partners Life: Underwriting restrictions 2020


nib postpones premium increases

nib postponed premium increases, with this notice published on Thursday: 

We’ve postponed premium increases for policies that are renewing in the April to June 2020 quarter. This postponement will apply to increases attributable to both medical inflation and age increases (including policies on five year age bands). Increases will continue to apply for children moving to adult rates and any changes due to a no claims discount.

These will be postponed until July 2020, but we will continue to review.

You will be aware that increase notices will have already gone out to many members who have policy anniversaries in this quarter. We will be contacting impacted members to advise them of the change. 


Medical / health insurance pricing comparison database updated

Medical /Health Insurance pricing comparison database V79 has now been issued to subscribers. This version includes the following changes:

  • Update Southern Cross rates effective 1/3/20
  • Update nib rates effective 1/4/20
  • Update Partners Life rates (including policy fee) effective 5/4/20

Fidelity Life: Working on helping those customers in hardship

Here is what Fidelity Life have to say about helping customers facing financial hardship during this time:

We’re working hard on a package of practical retention initiatives designed to meet customers' needs. We’ll confirm the details with you as soon as we can.

But in the meantime here's some clarity on what we can do right now to support customers dealing with hardship:

  • Premium holiday option - up to 12 months on select Life, Survivor’s Income and TPD covers
  • Leave without pay option - up to 12 months on select Income Protection and Monthly Mortgage Repayment covers

Retention tools - on a case by case basis our Retention team can help customers with making up missed payments, reinstating cover or a premium freeze or temporary hold

Click here to read more. 


Partners Life: Premium Increases

Partners Life have announced:

Having completed a routine review of emerging claims experience across our entire risk product range and considering medical inflation as it relates to Private Medical Cover, we have determined that the following underlying price increases will take effect from 5 April 2020, for premium structures other than Guaranteed Level.

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