Opinion: Have you ever wondered?

I remember the first time I heard a real, true to life claims story... there I was, dreading one of those awful staff meetings at one of my early jobs and we were asked for examples of how life insurance worked.

Wednesday, February 3rd 2010, 12:55PM 6 Comments

by Russell Hutchinson

Well, a colleague piped up that when her Dad died there had been "all sorts of payments and stuff, and it paid for me to go to university, and Mum kept the house".

Wow. Didn't I feel small.

I had a prejudice against insurance and shed it quickly, hearing such stories. However, there is a school of thought that doubts insurance is useful.

One man I know who regularly talks with the bureaucrats in Wellington says they wonder whether life insurance is useful.

They say, "there is no very good research that shows life insurance adds value". Now I know that you can make a lot of mistakes in science - "I had cancer, then I took vitamins, now I don't have cancer" - by confusing correlation with causation.

However, going back to my early colleague's story, we've got a real agent of causation: the money came from the insurance and was used to pay for real things; things that they could not have afforded if the money had not arrived. We know they were better off.

The next question the bureaucrats will say is, but was society better off? What about all the people that had less to spend because of their insurance premiums?

You may not believe it, but this kind of conversation really occurs. To which one might patiently explain that if a whole group of individuals have got together to spread an unpredictable and catastrophic risk (the main income earner dying, for example) into a series of shared, predictable and manageable premium payments, then maybe we should trust that they have it right and don't need any further explanation.

But you'd better be ready with your real life examples - because there are people out there who aren't sure. Sometimes they tell themselves this story to justify why they don't spend any money on insurance.

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Comments from our readers

On 3 February 2010 at 3:41 pm Johnny Adviser said:

The claim cheque is always bigger than the premium cheque. That's the best one I ever heard when I started out.

On 3 February 2010 at 5:04 pm Supplied said:

Here's a true life story. Last year I had a 45 year old client with no previous history suffer a dissected aorta. He was lucky to live and his Trauma claim paid off most of the mortgage and he has lived on his IP cover since and may be on it until 65. He has had to resign from his stressful job due to his BP remaining dangerously high etc. They have two teenage kids and their lives have been dramatically changed. Lucky they were not one of those "people" who listened to those other conversations! It would be great if we could print a whole lot of true life insurance stories in one publication so that people can read them if they require some reassurance - maybe someone should set up a website!

On 4 February 2010 at 2:12 pm Denis said:

I have worked in and around life insurance for nearly 30 years. Overall, I have been impressed by the professionalism and drop-everything urgency when a death claim appears. Despite the often unbearable sadness of the circumstances, I feel very proud when a claim is paid quickly and without fuss.

On 5 February 2010 at 7:02 pm 1 each way said:

I've see plenty from both side of the advise fence, both provider and adviser. It is a satisfying feeling when you have a family with the right cover for them and have it work in the most difficult personally challenging situations people face. The flip side, it is gut wrenching when good people make the poor decision to not take or drop cover because of perceived lack of value and they find themselves and their families ruined financially. We all can help this but the preception of our industry has a long way to go to ensure those who need us use us.

On 10 February 2010 at 10:35 am Wayne Harray said:

"...The next question the bureaucrats will say is, but was society better off? What about all the people that had less to spend because of their insurance premiums?..." One could argue exactly the same about the bureaucrats taxation regime!

On 11 February 2010 at 11:06 am Warren said:

In my 47 years of asssisting proposects to buy Life Insurance I have made a lot of friends and had a lot of claims. Not one person has ever regretted the call I made that turned a useless piece of paper into the most valuable document they have ever possessed all for a premium that is inconcieveably small. I have likewise never had a complaint over claim settlement although a number of widows mention they wished they had purchased more of the benefit.

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