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Transparency, simplicity 'key for insurance growth'

More needs to be done to ensure that insurance products and advice are transparent and easy to understand, industry commentators say.

Thursday, September 28th 2017, 6:00AM 1 Comment

A panel at the recent Financial Services Council conference reflected on the state of New Zealand’s insurance industry.

Fidelity Life chief executive Nadine Tereora said insurance products were still very complex.

“They use a lot of words that people don’t really understand, and we expect to sell those products. Part of that simplicity equation is that we need to simplify what we do, and we need to incorporate plain English. We also need to educate very early on,” she said.

“We need to think about starting at the early years when we don’t have the traditional triggers anymore; this is where behavioural economics is really important. It would mean that we actually set people up, right from the early stages, to value the important role advice plays when they need it.

“Also, we should create pathways that are simplistic and easy to understand, as well as identifying the right time to seek advice. The role financial advisers play in New Zealand is really important, because they’re a big part of education, in helping people understand what they need and the cost they can afford. We don’t always focus on that."

She said products needed to be designed that would do the right things at the right time for clients. Their need for insurance products would start low, then peak as they got older, before dropping away again, she said.

Affordability was an issue, the panel was told.

"How are we addressing that affordability? How can we help advisers do their jobs really well? By providing them with economic data that actually helps them service their customers and, ultimately, helps us as an industry build trust," Tereora said.

She said transparency around things such as commission was important to build trust in the sector.

NZIER chief executive Laurence Kubiak pointed to his earlier work for Sovereign, which showed that external agents could cost as much as 100% more for an insurance firm than sales executed by in-house staff.

Commission could make up 40% of their annual costs. But he said reducing commissions would not make much difference to what clients paid.  If commission dropped by 25% to 50%, premiums would only drop by 12% at the most.

Tereora said a big issue was that there was still an underinsurance gap in New Zealand, despite the sector’s best efforts.

“We have to do things differently as an industry. The big brands, product providers, have to lead the charge on that and support advisers and customers in terms of finding better ways to reach them and help them plan for things when they go wrong.”

More attention needed to be paid to the extra that advisers could add, she said.

“We’re very focused on the workings of the in-depth process of giving advice, if you even make a sale. Post-sale, we’re very focused on commissions. We need to think about the absolute importance and value of human interaction – sitting down and really getting quality advice around their specific needs, which is not always achieved through a product that is sold in the direct nature or digital pathway.”

She said advisers did a fantastic job for clients and built a lot of trust and rapport with a lifelong connection.  “They’re there well beyond the sale.”

 

Tags: Fidelity Life financial advisers FSC Insurance Advisers Nadine Tereora Sovereign

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Comments from our readers

On 29 September 2017 at 11:11 am Referee said:
Must agree with Nadine's comments. The younger generations need new simplified products so they have a choice.

For too long, the focus has been on improving existing products, rather than innovation directed towards the need of Gen X and Y. Starting low and peaking as one gets older is what they need - yes, it's about affordability.

Certainly, advisers can play a huge part in educating consumers but more and more people do their research before approaching or accepting advice from them. This means the life insurance industry, like the FSC, have to do more to supply consumers with independent information, e.g. what Life-Info has begun.

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