tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Tuesday, March 19th, 6:25PM

Special Report

rss
Current Special Report

AIA: Lies, Damned Lies and Statistics

It's an information-rich world, permitting all manner of opinion, and what is true depends on one's point of view. Darrin Franks, AIA New Zealand's Head of Distribution and Marketing, explores the customers' view of the insurance industry.

Sunday, May 6th 2012, 4:43PM

by Darrin Franks

It's been said that in certain professions, money can buy you any opinion you like. This is unhelpful if one seeks objectivity on a particular subject. Similarly, it seems there is no shortage of opinion about to why New Zealand has one of the worst life risks insurance take-up rates of all the OECD nations.

Even the the Financial Services Council (formerly the ISI) has recently added ‘under-insurance' to previous problematic vocabulary such as ‘churn'.

The extraordinary counter-statistic is that New Zealand's Canterbury earthquake ranks as one of the largest insured events in the world.  

Rather than join the hand-wringing, we thought it would help to ask the population at large what they think of insurance, and share these opinions with people charged, in their chosen occupation, with engaging with consumers or would-be consumers.

We will do so in some detail at the upcoming Professional Advisers Association national roadshow.

It's clear that when you say ‘insurance', the default thought is typically of material risk.

Indeed, of the survey respondents, 87% held car insurance, 84% contents insurance and 70% house cover. When it came to life risks, only half had a life insurance policy and 34% health insurance. Trauma/critical illness, total and permanent disability and income protection were lucky to register at all, with 11, 12 and 11% representation respectively.

The conclusion: It appears to hold true that ‘he who dies with the most toys wins'. We're insured so well against material loss that our partners, family and kids can embark on the not so easy task of selling off assets to ensure financial survival, or some degree of it, in the event of our demise. Is that the measure of success?

What about the consumer product knowledge, the perception of value and how it drives behaviour?

In a nutshell, it appears that if knowledge of products is strong the perception of value improves, as does the purchasing and retention behaviour. The inverse correlation is simple: I don't know about the product so I perceive no value and I will not buy - or if I do, I'm less likely to retain it.

Specifically, 57% of the respondents had never heard of, or know very little about trauma/critical illness, while total and permanent disability was largely unknown at 43% and income protection at 27%.

This is in contrast to every single respondent having heard of home contents insurance, and 96% believed they knew either a lot or enough about it.

The number one reason people don't have life insurance is that it is perceived to be too expensive, and therefore not good value for money.

I guess you don't get to appreciate the value when you are dead, but in 27 years I have never had anyone's family tell me they got paid too much upon the death of a loved one.

Nonetheless, if constantly rising premiums are an issue of consumer sustainability there may be some lessons in the echoes of the late 1980s and early 1990s, when the favourite cry from some quarters was ‘buy term and invest the rest'. Whatever your view of insurance product returns of that period, you can't deny that there is merit in level and return of premiums for some consumers, no matter how good the discounted cash flow models.   

On the subject of cost and value, hats off to the insurer who recently thought giving life insurance away for a year to new parents would somehow improve the perceived value of the industry. Time will tell, but as with all gifts, it's the thought that counts.

If life risks insurance is seen as a cost with little value, then we have some work to do to catch our cousins in material risk insurance.

Buying the former is an educated economic decision about transferring the financial burden that will occur at the point (or soon after) of an insurable event, in much the same way as material risk is evaluated. The trick may be to make life risks just as tangible.  

I know I am preaching to the converted, and given that churn continues largely unabated, there is no doubt that those customers are also converted (often). The question is: Who is going to convert the rest? Time for a crusade into the uncharted waters of the population...God knows they need us.  

 

Footnote: AIA New Zealand commissioned a professional research company to conduct an internet-based survey. Three thousand emails were sent to individuals 18 years and older who are at least jointly responsible for financial decisions. Data was gathered from 1,223 respondents. Key industries such as financial services related were excluded from the survey to limit any data skew.      

« Finally, a better answer for life and health sales Harbour Australasian Equity Income Fund »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous Special Reports

MORE NEWS»

News Bites
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 14 March 2024 9:32am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com