1 Comment 1 Commentby Jon-Paul Hale
Jon-Paul Hale
No surprises with the confined echo chamber that Consumer NZ conducted their recent insurance market survey in. Consumer NZ is great if you are looking to buy an item or access a service that has an immediate to short- term lifespan – perhaps, washing machines or Netflix services.
When it comes to financial services, the perception of the salesperson bears no resemblance to the purchase of a product or service. As too, the experience of a contents insurance claim for a broken TV cannot easily be compared with a complex disability claim. These types of experience with the industry are primarily what people in the Consumer NZ survey are likely to have been responding to.
As Russell Hutchinson pointed out this week, a good outcome from a life insurance policy is no claim; the consumer paid their premium for the protection of the insurance for a risk that did not materialise.
They had the peace of mind of knowing they were covered, and better still did not have some horrible medical affliction strike them down. Most would agree that was a great outcome, but some consumers could (incorrectly) see that as a waste of money.
We have become a society based on material interests and short- term thinking; insurance is a long- term product, potentially decades long. So to survey people who could be self-help DIY'ers (and I'm in that camp for many things too) on their experience with insurance and they find an inadequate response leaves me, frankly, unsurprised.
My motivation for getting into advising was largely because of the impact a lack of information and understanding of insurance had on my family. I wanted to be able to provide the depth of advice you can't get from reading a magazine or trawling through direct insurance sites.
Genuine advice, and not just policy sales, takes a far more in-depth understanding of client situations, products, insurer process, claim management, medical treatments, and financial detail that the majority of the population just don’t have enough experience of.
Our education system does not cover this stuff in sufficient detail for people to have the skills required to get it right. I've been involved in insurance for nearly 20 years, and I still learn things daily.
As consumers we can all be guilty of overconfidence, we know enough to think we know, but don't know enough to realise when we're getting it wrong.
I work with many professionals – doctors, lawyers, accountants – people who know their stuff. Others clients quite a few have parents that have been insurance advisers. These are examples of professional people with high levels of understanding in their own field and some insurance knowledge, but they know they don't know enough to advise themselves.
So why would the average Joe think they know better than someone who is a subject matter expert?
Especially when they are evaluating a product they have purchased directly, for example life cover, and they're still here to comment about it. Their only product experience is paying the premium, because they are still alive.
The trust issue with the results of the Consumer NZ survey is that the person who has DIY'ed their life insurance purchase doesn't know enough to make a judgement on the likelihood of it being fit for purpose.
The difference between purchasing through an adviser and a direct purchase is in the added value, the adviser gives. They can identify additional risks the client would not have considered. This can sometimes make a life insurance purchase more complicated, and lead to a higher premium (more coverage). There is also the potential for the client to become confused.
Many people do not understand the difference between trauma cover, disability cover and medical insurance. It has to be explained in simple terms, taking the time and patience to help them understand.
So no, Consumer NZ is not advocating for the consumer on this issue. They are beating the thinly-veiled drum to sell more subscriptions; and in reality could easily make the underinsurance issues in New Zealand worse.
Yes, I am a life insurance adviser, I get paid on commission, and my client's grudgingly pay premiums they would rather spend elsewhere. But they understand that they need to protect themselves and their families from significant financial risks. Something Consumer NZ seems to be missing in the conversation they are attempting to stir up.
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