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Trauma problematic, Fidelity boss says

Fidelity Life chief executive Milton Jennings said trauma insurance is problematic for the industry.

Monday, March 23rd 2015, 6:00AM 9 Comments

by Susan Edmunds

"The number of claims coming through is very high, something has to be done.

"We're seeing big payouts on minor conditions. People are back to work in three months and ending up with $1 million. It’s a windfall rather than covering a need."

He said that was driving up the cost of premiums and prompting more interest in simple trauma products that would pay out in a more limited number of circumstances. “Companies are looking at trying to strip out benefits so claims aren’t as high and premiums become more affordable.”

But he said it became hard for advisers who had to weigh up the best policy to recommend to a client. If they were recommending a product less likely to pay out, they had to make that clear.

Fidelity Life has launched a new product that will offer cover for up to five different, unrelated events, each paying up to 20% of the total sum insured.

Trauma Multi – Standalone is available separate to life cover.

“Traditionally trauma insurance sees a lump sum paid in the event of a health trauma occurring.  New trauma cover could be taken out after a claim, but that would require a new health review which would often be influenced by the illness suffered; therefore affecting future insurability,” Jennings said.

“But this way Kiwis have the confidence that they can receive separate payouts, in the event that they suffer multiple unrelated health traumas.  These payments are not severity-based like other products in the market which can make it difficult for the customer to know what they will and won’t be paid out for, without going through a full assessment of both the condition and the severity of it.”

Tags: Fidelity Life Milton Jennings Trauma

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Comments from our readers

On 27 March 2015 at 3:48 pm Tash said:
New product? This seems nothing more than the old Lifecare product Fidelity has had for ages, just now available on a standalone basis. I'm not sure how this differs from other providers products with trauma buy-back. Yes there may not be a specific exclusion of the trauma condition claimed initially but it seems to me a second "unrelated" claim under the same condition is an extremely remote possibility - certainly not something one could rely on to get additional money to compensate for the first trauma if 20% is not enough.
Anyone got other thoughts on how this satisfies an actual clients needs?
On 13 April 2015 at 1:45 pm Majella said:
Agreed, Tash. A thought of pigs & lipstick comes to mind...what I find most satisfactory is the "severe" trauma benefit from one particular provider.

When placed in combination with the standard definition trauma for a lesser amount - say, 1 or 2 year's net income - it is now possible to cover a large financial issue at an affordable price - say the whole $500,000 mortgage. If the trauma is severe enough to shorten ones life, then the larger amount is needed.

The limited 'severe' definitions apply to only 9 of the 46 covered events and are not unreasonable, but it costs 25% of standard.

So, in combination, lets look at a 45 year old who has a heart attack that qualifies under the standard but not the severe definition. The standard contract pays the lower sum assured. Later, however, he has a further heart attack that IS 'severe' and qualifies under that contract, then the balance is paid out.

So, the best of both worlds - affordable trauma that doesn't provide 'lotto' wins for minor issues but does meet the larger financial commitments if the health event is 'significant'.

It used to be that Sovereign & Fidelity were the issuers I'd expect to generate such innovative products, but sadly no. This rehash of what was already a weird hybrid product in the first place from Fidelity and the expensive and complex Progressive Care from Sovereign - neither of these address the issues Milton has stated - higher threshold definitions for claims at an affordable price.
On 13 April 2015 at 1:49 pm Majella said:
Agreed, Tash. A thought of pigs & lipstick comes to mind...what I find most satisfactory is the "severe" trauma benefit from one particular provider.

When placed in combination with the standard definition trauma for a lesser amount - say, 1 or 2 year's net income - it is now possible to cover a large financial issue at an affordable price - say the whole $500,000 mortgage. If the trauma is severe enough to shorten ones life, then the larger amount is needed.

The limited 'severe' definitions apply to only 9 of the 46 covered events and are not unreasonable, but it costs 25% of standard.

So, in combination, lets look at a 45 year old who has a heart attack that qualifies under the standard but not the severe definition. The standard contract pays the lower sum assured. Later, however, he has a further heart attack that IS 'severe' and qualifies under that contract, then the balance is paid out.

So, the best of both worlds - affordable trauma that doesn't provide 'lotto' wins for minor issues but does meet the larger financial commitments if the health event is 'significant'.

It used to be that Sovereign & Fidelity were the issuers I'd expect to generate such innovative products, but sadly no. This rehash of what was already a weird hybrid product in the first place from Fidelity and the expensive and complex Progressive Care from Sovereign - neither of these address the issues Milton has stated - higher threshold definitions for claims at an affordable price.
On 14 April 2015 at 9:35 am billy the broker said:
I just wonder if Fids guaranteed level premium policy wording is now coming back to bite them in the bum!
On 14 April 2015 at 2:30 pm Graeme Lindsay said:
Well said Tash and Majella. Fidelity's Multi product is just Lifecare with a new cover. In fact, it is very similar to a Norwich product that was around in the nineties and disappeared after the Asteron takeover...
I agree with Majella's comments - the (Asteron) severity-based trauma model is far more logical and likely to be meaningful to clients, than either the (Fidelity) 20% per claim model or the (Sovereign) complex and expensive model.
In the few cases that I have worked on since the Asteron model was launched, I have been able to use the Standard/Severe model to enhance the real benefits for clients.
On 15 April 2015 at 9:40 am Tash said:
From Majella's comments around costs I think she was probably referring to Partners Life's Severe Trauma Cover product. In my view this, when combined with the usual trauma cover, is a most flexible and cost effective option, especially as TPD is also taken care of (automatically included in Trauma Cover and can now be added as an option under Severe trauma Cover).
On 29 April 2015 at 1:44 pm Majella said:
Tash - Correct. Graeme's assumption that the new Asteron Major add-on was incorrect. Having looked at it, I have to question the cost - as an example, a case I'm working on now: the cost of the Trauma/Severe with TPD was 63% of the cost of the same cover with Asteron Standard/Major, and the TPD is an additional $109 pm, so effectively 47% of cost. As well, with the Partners structure options, there is a myriad of solutions that can be tailored with great accuracy to need & cost.

I subscribe to your service Graeme, but I am detecting some anti-bias with regard to PL - viz the Loss of Revenue rating. The -12 points for "Receivership" and -20 for "Change of Ownership" terms seem harsh, given that other providers apply similar treatments in the event - PL has simply been upfront about it.

As well, I don't understand why the "Definition of Disability" is marked down so much v. others, while "Partial Disability" is not much regarded - given the non-requirement of any term of Total Disability before a Partial benefit can be claimed.
On 29 April 2015 at 4:45 pm Tash said:
I'd like to see Graeme rate partial disability benefits under loss of revenue/business disability type products, by considering what "partial disability means" and the benefit formula for calculating payments.

Some products may have a partial disability benefit but monetary results in the client's pocket will be disappointing, or even non-existent, as in some cases the client is no longer partially disabled at all if they can return to work for 20 hours per week!
On 30 April 2015 at 3:58 pm Majella said:
Yes, Tash - among them the very highly rated Asteron.

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