Opinion: What is trauma for?

Sometimes people get you thinking - Noel Vaughan, who started up Pinnacle Life - got me thinking recently about trauma insurance. Noel asked "what's it for?"

Wednesday, June 24th 2009, 6:47AM 8 Comments

by Russell Hutchinson

Trying to stay up with the sudden gear change I wondered about this just a moment too long - and he pounced; launching into a spirited challenge on traditional thinking about trauma insurance.

You see, if insurance is about creating a predictable financial outcome (at least) from a sadly unpredictable part of life, then trauma seems to have only marginal utility. Medical insurance pays to fix you up, disability insurance pays to keep you going financially, and trauma insurance - what does that do?

Sure, you get wads of cash tied to no particular cost. Which creates the brilliant opportunity to recover from your heart attack in the Bahamas, perhaps. Only not if the cause of the disability was depression, or back problems.

Then, if you didn't have comprehensive disability cover, you have twice as much to be morose about, as you wonder why you didn't try eating more butter, or exercising less.

The point is, it's a bit random. That's not what insurance is supposed to be about. Having said that, there is probably a place for it - some people cannot buy disability insurance. For them, this at least plugs half the gap left by DI. For others it supplements DI.

It also seems that Pinnacle agrees - because their recent advertising has all been about trauma. Which also makes you think...

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Comments from our readers

On 26 June 2009 at 1:56 pm simon said:

It certainly has a place in the disability process. Even with a 4 week wait with DI, if you have a heart attack and no ACC, there will be a significant financial loss. Also partner may need time off work to help with care. A second financial loss. Finally, doesn't DI only replace 75% of income?

On 26 June 2009 at 2:01 pm Gary Hemmings said:

Re Russell Hutchinson. Trauma comment reminds me of his diatribe to the Newpark group last year. Boring,irrelevant, unresearched, no conclusion and just plain dumb. Has he ever met someone who has had a cancer diagnosis and needed to go for 7 weeks treatment whose husband was able to take time off work to be with her without losing his holidays or 7 weeks income. Someone who got MS and needed huge support that no one else pays for. Why in gods name do you publish such nonsense. It spoils all the brilliant other work you do. Very few of the 28,000 who die each year in NZ do so suddenly. Most get really crook and hang around. Ask Dr Marius Barnard why he pursued the insurers to get this type of cover.

On 26 June 2009 at 3:42 pm Ray said:

I think you meant Noel Vaughan, Gary. It's easy to bag something you've not been able to arrange re-insurance for as yet, to replace the poor excuse for a product you can offer so far on your website. 20% cheaper though!

On 29 June 2009 at 12:42 pm Giles Thorman said:

I am not entirely sure why Russell Hutchinson should get excited about the opinions of someone who leeches off everyone else in the Industry, the sooner that Pinnacle Life disappears the better. How could anyone in the industry possibly ask the question "whats it for" of Trauma? Noel Vaughan should be embarrassed, or perhaps it was just to get some free publicity.

On 6 July 2009 at 5:13 pm Kevin W said:

Maybe the next article article could be asking Mr Vaughan what 'mortgage protection insurance' is for?

On 9 July 2009 at 10:01 am Gerard said:

We'll it certainly looks as if you got the responce you were looking for!
I think a better question about trauma would be how much should people have. Insurers will allow you to have a mutliple of income (say 5x), I've seen advisers argue it should be enough to pay off the mortgage, obviously each situation will be different, but the adviser needs to understand what the money would be used for. In my mind Trauma cover is the most relevant product in existence, all of my clients have some!

On 10 July 2009 at 10:03 am Bill Myers said:

Budget Insurance.....budget advice.

On 21 July 2009 at 3:49 pm Tony said:

If you really think its a bit random consider this recent situation of my client who opted to include Trauma cover as part of his risk management. Being diagnosed recently with Leukemia he is very grateful of the $100,000 he has just recieved under his Trauma cover. Yes he has DI and that gives him some assurance around regular income still turning up, the Trauma cover however has allowed him the benefit of reducing his mortgage by half, something that without this payment would have left him unable to meet his mortgage commitments thus the only option being to sell up. With only 5% equity being put into the purchase 18 months ago that would have been a very sad outcome.
Now the family gets to retain the home while he undergoes treatment. Is he glad he had Trauma cover, you bet he is, am I glad I recommend it to all my clients, you bet I am, like Garard above I beleive Trauma cover is one of the most relevant products for anyone in todays enviornment.

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