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Things we should stop doing

The “Primary Life” Concept I opened up the quote tool and it says “Primary Life” why? My colleague said ‘you need to have one life insured to act as the policy owner’. Why? Doesn’t your system allow for two owners? Or even for a trust or company to own the policy?

Thursday, November 3rd 2016, 1:22PM 4 Comments

by Russell Hutchinson

Then someone said ‘you need one life to act as a reference and all the benefits for the others hang off that.’ Why? Can’t we have a policy number and change the people insured that attach to that?

Another person said ‘you can’t have a policy without a person being insured, so you have to choose at least one’ to which I said “I agree, but then if that one is declined for cover and the ‘secondary life’ is accepted what happens?” When they told me that the insurer would decline the case, and ask for the application to be re-issued with a new “Primary Life” which is a silly waste of time.

This fiction, almost suggestive that one life is somehow more important than another, has been taken to a ridiculous extreme. Of course, the truth is, it is just a case of system limitations, around which an eco-system of rationalisations has sprung up. Systems written like that are dumb and they make the job of advising on insurance harder – because of the duplicate paperwork and the clients that get grumpy about it. When we build new systems we should eradicate that thinking.

Increasing the Price at Every Step in the Sales Process

Starting the pricing process at the lowest price and go up from there. With cars and houses it is the reverse, unless it’s an auction of course, but that’s different. Where prices are uncertain in general insurance they won’t quote you one until they have got the price right for your circumstances. We quote the best possible price, assuming a ‘preferred life’ with no rateable health issues. Then keep springing the bad news sometimes doubling the price and chopping down the cover. Just because insurers are happy with this ridiculous approach doesn’t mean you have to be. 

Of course, it doesn’t stop with the cover going in-force. In these low inflation times almost nothing will rise as fast as your insurance premium. Rates and residential property prices are the only things that comes close.

Nasty Policy Documents

Half the policy documents in the market could be held up as the antithesis of design: too long, hard to understand words, sometimes offensive definitions written in ancient fonts, printed on paper.

One friend put his policy into trust and the document came back from the company apparently unchanged – but it had been changed, on the system, it was just that the policy document could not be changed because the field length was too short. The only thing is… the document is supposed to be the legal contract.

Documents should not be issued on paper as standard. We managed to escape the clutches of hard-copy share certificates some decades ago. Given digital documents we should now be able to customise the document to the customer. References to gender should be correct. Only the benefits purchased should be included.

Some companies keep talking about making policies simpler, and achieve that by taking away benefits. But most policies would be a heck of a lot simpler if they didn’t talk about all the benefits that don’t apply to the person that bought it.

Tags: Russell Hutchinson

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Comments from our readers

On 3 November 2016 at 3:17 pm Tash said:
Russell, you say "In these low inflation times almost nothing will rise as fast as your insurance premium." This is very disappointing. You of all people should know that (unless you are referring to medical insurance, which you did not qualify) general inflation has next to no impact on annual premium rises. All this does is perpetuate ignorance and misunderstanding and make our lives more difficult trying to explain why premiums go up each year.
On 4 November 2016 at 10:37 am Dirty Harry said:
Tash, In what world do rate-for-age yearly stepped life, trauma and income premiums not rise by 15 to 20% (plus inflation, but since this is so confusing let's set that aside for now, mmkay?) for those over 40? Yes, medical rates rise. Russel did not say inflation affects prices, he said prices rise much faster than inflation. Which is dead right.

I actually agree with all of what Russel has said. Insurers: your move.
On 4 November 2016 at 3:31 pm Selwyn said:
Some Dinosaurs did not move quickly enough and died, the others learnt little from that Russell and they all became extinct!
On 7 November 2016 at 10:55 am Tash said:
Dirty Harry
I do not dispute YRT premiums rise by double digit percentages annually but these increases are not significantly influenced by general inflation. Russell used inflation as a base for comparing premium increases. On it's own this looks unreasonable can only stir up uninformed negative sentiment.

Comparing inflation rates with YRT premium increases is meaningless and irrelevant and does nothing to educate punters (or advisers).

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