If done correctly replacement not a problem
The idea of replacing insurance policies part way through their lifespan is making a lot of people very nervous, according to one of the life insurance industry's leading lights.
Thursday, October 28th 2021, 9:07AM 
5 Comments
by Eric Frykberg
Fidelity Life product owner Leigh Bennett told an adviser webinar that done right, it need not be a problem.
Product replacement was the focus of a webinar run by Financial Advice New Zealand.
The issue has come under focus as Covid-induced financial insecurity is making more people want to adjust their policies to make payments more manageable.
This could involve adjusting payment schedules, switching to a new product or even going to a new provider.
Bennett told the webinar advisers had to make sure clients knew that exactly what policy they were changing to and what impact that would have and that this was expressed in plain English.
She added customers had to be sure super clear on what their needs were and how they would be served by the new scheme.
Bennett added Covid had not affected life insurance as much as some others, but there was still an impact.
“People are really price conscious and when you have a customer who is talking about price and this is the only thing they are concerned with, it is really important that (the adviser) is talking about the impacts (of a change).
She said people's medical history or their earnings might have altered, which could be very important party of the talk between customer and adviser.
Bennett said it was important to be aware of the risks of people cancelling policies because of their costs.
“From a product provider's point of view, we have always placed a lot of emphasis on retention (of insurance policies), especially now in this Covid era.
“We work really closely with customers to make sure the decisions they are making are not kneejerk reactions and they have bit of time to weigh up their options, so they have all of the information and they are able to make a really informed decision.”
Bennett added customers were far better informed these days than before – even so, the adviser had a vital role in explaining all of their options before they made any decisions.
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Comments from our readers
The general points seem fairly well made.
Medical conditions may have changed so moving provider does carry risks in terms of resetting pre existing medical conditions, benefits may be different and chasing price may be a short term game.
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It is about service, appropriate products, and the most effective products for clients. And something I have written about elsewhere.
Until the client's situation conspires against them. This is the rub, you have to have robust measures to manage the disclosure risk and the insurers are not helping advisers with this.
Frankly, the insurers have seen the opportunity to slim down their underwriting processes as the advice and disclosure piece gets pushed back to the adviser and the client as the responsible parties.
If you use electronic application systems without other more robust measures for disclosure, you should be concerned about replacement.
If you have a robust process and you drive for evidence from clients about their medical position, and financial position, then replacement should not be an issue.