'Threat multipliers' that turn personal crises into financial disasters

This article by Rob Stock for stuff.co.nz 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. 

Health insurance's 'wait or pay' moments

Rob Stock shares a personal 'wait or pay' story - starting with these telling words: 

"Do you have health insurance?"

Chilling words you never want to hear from a doctor.

They always come just before he or she tells you how long you'll have to wait for your tests or treatment, if you don't.

This article on Stuff.co.nz discusses the 'wait or pay' dilemma people are often faced with when in need of some medical tests or treatment.

KiwiSaver nest-eggs lost for lack of insurance coverage

Rob Stock has a good article in stuff.co.nz explaining that hardship is often caused by disability - these are the essential facts:

"In the 12 months to the end of March, $81 million was paid out of KiwiSaver in cases of financial hardship, with 13,790 people drawing out an average of $5786 to help pay the bills."

Therefore KiwiSaver next-eggs are sometimes lost because they are used up early during a period of disability. This is an important issue which was sidelined from the design of KiwiSaver by politicians who legislated to keep basic levels of insurance out of the superannuation scheme. Well worth a read, and inclusion in client newsletters. 

Another financial planning issue was also identified - and it presages a large increase in people working until they are seventy years old: 

Two years' ago BNZ forecast that based on current payment trajectories, a third of people with mortgages wouldn't have paid them off by age 65.

...or they use KiwiSaver to pay of the balance. 

Insurance and Assisted Dying

Rob Stock published an interesting piece on assisted dying, in particular insurers possible views on the subject. I spoke to Rob Stock on the subject, but you also get comments from several other people involved in the industry as well. Well worth a look if you haven't caught it. Given the publicity associated with the proposed law to permit assistance to terminally ill people to die this is an area it is worth developing a policy on. Link

Financial Products You Can Live Without?

Rob Stock has an article on financial products you can live without. I hope he's right about all of them, and at first glance I agree. Having said that, sometimes people's circumstances are such that they don't have the luxury of the choices that others have. You  can read his article at this link - it's worth a look, and only a two-minute read. His principles are bang on: these products are expensive work-arounds for problems which can generally be solved with a cheap behavioral solution called 'budgeting'. But there is some complexity hidden behind that. Some people can't budget. Some people can, but are lower than the bottom rung in terms of resources. Take payday loans. In an ideal world no-one would ever use these. But this isn't an ideal world. For some people, deciding today what to do, if the car is broken, and needs fixing an overpriced payday loan can do it. The alternative may mean losing your job. Better planning would help, so might better public transport, but that's back in an ideal world, and maybe you're standing in the mechanics workshop trying to make a quick decision before calling a cab to get to work. Low-cost health insurance plans and funeral benefits have similar use cases. 

Southern Cross and ACC scrap over Liability

Southern Cross set up a team of specialists ten years ago because they believed that ACC was wrongly turning down legitimate claims by policyholders, leaving the Southern Cross to pay the cost of treating them. 'The insurer said it scrutinised around 200 cases a month where policyholders had had claims declined, usually older people whose injuries ACC concluded were wholly or substantially caused not by their accidents, but by underlying medical conditions. Usually age-related degenerative conditions.' Click here to read more from Rob Stock. The emphasis was added by me, that is a very large number of claims - something like 24,000 claims since the team was set up by Southern Cross. 

You should read the whole article. There is a wealth of claims data on the number of claims that were subject to some sort of dispute, the number of decisions changed, and the amount of money that is at stake. $4.95 million in payments made by ACC to Southern Cross in the year to June 2016. More than that, is the extent of the process Southern Cross engages in. 

Insurance Industry A Healthier Place to Work Now

Rob Stock has this cool piece on how the insurance industry used to be really unhealthy, but is now getting its act together. It includes comments by Naomi Ballantyne (Partners Life), and references to other CEOs, Ralph Stewart (Retirement Income Group) and Lance Walker (CIGNA), who are also committed to healthier lifestyles. To this I could add Rob Hennin (nib) who is a keen cyclist, and Graeme Edwards (AIA) is also very active. It has been a revolution. I've turned things around quite a bit too from my old self. 

New Zealanders are Fat and in Denial About it, Says Survey

Independent research conducted for the annual Cigna 360° Wellbeing Score found that of the study comparing 11 countries New Zealanders were not only the chubbiest, but were "wildly off the mark" in estimating how fat they were.

"I think it's normal to be overweight now," New Zealand Nutrition Foundation dietitian Sarah Hanrahan said. "More than half the population is overweight. You will see more overweight than you will see within the normal weight range, and in some parts of town it will be even more than that." 

Those surveyed who reported enjoying watching rugby were statistically fatter than the average person.The figures are from the annual Cigna 360° Wellbeing Score survey, with a sample size of 1000 New Zealanders, 50/50 male/female, various ages from 25+. 

Some of the surveys top insights include:

  • New Zealand’s overall health and well-being score was 62.7, slightly below the average score across all countries surveyed of 63.4.
  • 44% rated overall health and wellbeing as excellent or very good.
  • The highest health and well-being score was achieved by those in the 25-29 age bracket (49%), this falls to 40% from 40 and stays there.
  • Family health and wellbeing is the most important to new Zealanders at 50%, this is followed by physical wellbeing at 40%
  • Spending time with family was the most important for those aged 50+
  • More than half of Kiwis have juice and almost 30% of Kiwis have fizzy drinks in their fridges.
  • Cancer was rated the greatest health concern, ahead of debilitating illnesses, heart disease, and depression
  • Contrary to popular belief, just 5% drank alcohol daily; this was highest among 60+ at 14%. Almost half drink alcohol at least once a week, averaging 3.5 standard drinks per session.
  • An average of 34 hours a week are spent on digital activities (internet browsing, social networking, email, online video, gaming and online shopping) compared to Thai people who spend an average of 54 hours per week.
  • New Zealand had the highest percentage of overweight and obese people out of all countries surveyed.


Read more here on Stuff.co.nz. Alternatively you can view the 360º Wellbeing score video and infographic here.


Rob Stock Reports on Trail Commissions

Rob Stock has this article attacking 'money for nothing' payments on trail commissions on products where the adviser no longer has the right to advise on a product. Link

When this issue was first raised in Goodreturns last year I had several advisers approach me pointing out that the financial agreement between the investment or insurance company and the adviser was made years ago, and never included a stipulation that investment advice would be given. So, they say, 'what has the financial contract got to do with the current situation?' 

Rob Stock suggests it might cut prices:

"The costs of insurance could drop if calls to end 'money-for-nothing' annual commission payments to financial advisers who are no longer providing advice or service to clients are successful."

But it is very unlikely.

The number of products in the category being discussed is tiny. To provide some context, the premium in the affected category is between $80 million and $110 million, but this pales by comparison with the 1.986 billion not affected (Public FSC summary statistics to 30 June 2015).

Some of those old products are on ancient computer systems which cost a lot to maintain - when costs are properly allocated they may be making losses. I doubt very much that there would be much movement in actual premiums even for the specific products, let alone insurance in general.