direct versus advised
TRANSCRIPT
1
Direct Versus Advised
Comparing Effectively with Online Product Offers
10 February 2015
Russell Hutchinson
www.chatswood.co.nz
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Learning Objectives• Familiarity with differences in:
o Application process
o Underwriting
o Pricing
o Product coverage
o Sales support – “no advice” and “class advice” versus “full personalised
advice”
• Ability to combine an understanding of these differences
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Which “Direct” Offers Are We
Talking About?Please message any direct insurers you would like to list and discuss
Categories for discussion:
• Short-form, over-the-counter, no/low advice, limited plans
• Full underwriting process, advised, extensive plans
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Direct InsurersBanks:
• ANZ, BNZ, Co-op Bank, Westpac and similar
Direct sellers:
• CIGNA, Pinnacle Life, Countdown Insurance
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Media Focus: Price, Price, Price …The focus on comparison in the media is overwhelmingly on price- not
features
• 5 December article at Stuff.co.nz
• Consumer Magazine – recent reviews were price focused in Life,
general and medical, even ignoring financial stability which they once
included
• This suggests, implicitly that “all insurance is the same”
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Sample Price ComparisonFrom ISI/FSC stats at Q3 2011, author interviews, and estimates, plus consulting
Actuary input.
Some direct offers can be
more expensive – such as
AA life. We don’t show that
data here, however,
Bank insurers usually at
the cheaper end of the
advised range
These direct insurers are
typically 5% to 10%
cheaper.
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Media Focus: Claims
Stock correctly identifies some general issues with insurance underwriting:
• Insurers often wish to ask fewer questions
• Clients are not underwriters
• There are situations where the question of disclosure is complex and difficult
Rob’s example: he explains that the client: "...answered "No", when she had been
to the doctor's on a number of occasions, and she'd not "disclosed" the history of
cancer in her family.“
This may not be just about the form, but about the sales process. Problems with a
limited or no advice sales process include: no advice on replacement, limited
experience of underwriting, little industry knowledge or context, no advice on cover
amounts
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The Coming of the Angry Policyholder
• There is evidence that customers are more sophisticated than media
• A UK customer advocacy group: “Angry Policyholders”, was established
because of the perception that the ‘any occupation’ and ‘activities of daily
living’ definitions for TPD and IP was unfair.
• They believe this definition should never be used.
• Many financial advisers agree.
• Obviously when quality differences are explained consumers do
understand.
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Direct Versus Advised – Life
This is a life cover case is based on a female age 35 non-smoker.
What effect does commission have on the product selected? In this case
higher commission products correlate with higher quality of coverage
The lowest score for the product in the set we research is 92%, shared by
ANZ, BNZ, and AMP-RPP. The highest is 100%, held by Asteron, and most
intermediated companies score between 96% and 100%. Most direct to
consumer offers score between 92% and 94% with the exception of Westpac.
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Countdown Insurance
Countdown is the latest company to enter
the insurance market, offering a range of
product underwritten by CIGNA. The range
includes:
• Bill Protection Insurance
• Pet Insurance
• Travel Insurance
• Life Insurance
• Accidental Death
This is a consumer-focused offer. Note the
prominence in the offer of bill protection
insurance, which is judged to have near-
universal appeal.
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Sample Countdown Rate Comparison
Cover Amount Standard Premium Healthy Lifestyle
Premium
Sovereign
$100,000 $15.05 $13.17 $16.27
$200,000 $22.84 $19.99 $25.57
$250,000 $26.74 $23.40 $29.84
$300,000 $30.63 $26.80 $33.84
$500,000 $44.10 $38.59 $45.46
$750,000 $60.95 $53.33 $63.48
$1,000,000 $77.79 $68.07 $80.34
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Exclusion Limitations“We will not pay any benefit under the Serious Illness Benefit if the claimed
condition is caused or contributed to, directly or indirectly, by:
• attempted suicide, intentional self-injury, whether sane or insane
• an unlawful act by you or the Life Insured
• alcohol or drugs taken by the Life Insured (unless prescribed and taken as
prescribed by a registered medical practitioner)
• driving a motor vehicle with a blood alcohol level in excess of the minimum
legal limit.”
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Direct Versus Advised – Trauma
In the case of trauma the differences are more significant. The lower score
is just 52% of the best. In this case we used only the standard trauma
options – choosing not to add extra features such as early cancer and other
diagnosis benefits.
The lowest score for an intermediated product is 74%, but most sit in a
range between 85% and 100%. The highest score by a direct-to-consumer
company was Pinnacle Life at 77% with most in the range of 60% to 77%.
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Summary
• Short-form underwriting is convenient but comes with risks. Those
risks can be amplified if the person helping with the sale is motivated
to coach or advise minimal disclosure
• Price can vary a lot – you need to compare – but the better half of
direct products will have a 5% to 10% price advantage over the
cheaper advised products. Some will be more expensive
• Product varies a great deal:
o Life cover will be similar but exclusions can be significant
o Trauma and Income Cover the differences can be very large and
customers do care – remember the “Angry Policyholders”
movement in the UK
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Questions1. Name three direct insurers
2. What is the typical price difference between a well-priced direct offer
and a well-priced advised offer?
3. Give an example of an exclusion limitation
4. What is the product rating gap typical between a direct trauma product
and an advised trauma product
5. Name a problem with a limited or no-advice sales process
6. Name a problem with a full underwriting process
7. What is the name of the UK group advocating for better wordings?
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