Interesting comments from Consumer, quite contrary to the experience we have seen.
Consumers are more likely to find their policy doesn't work as expected when they have arranged their cover directly with the insurer because the majority of consumers don't know what they don't know.
The NZ Herald article we're discussing is here The Consumer's approach of mixing what is mostly a general insurance experience, house, car & contents covers, with life insurance commissions demonstrates that Consumer has a relatively poor understanding of the insurance market.
It is great for headlines, at the same time demonstrates to industry, and government, that they have little understanding that is relevant to the discussion.
As too a policyholder's experience with a claim for a broken TV is quite different from a Trauma or a Disability claim.
Also the commission thing again, interestingly, whether there's visible commission involved or not, the premiums the consumer pays is roughly the same. Certainly, when you compare life cover across the industry, the other benefits have variation as the benefits on the policies can vary significantly.
The commission is paid for the distribution of the products; with a direct insurer, that's the TV and media ads you see, and the salespeople they employ in their customer service teams.
Which does mean your direct 'adviser' is aligned to and has the insurers interests first, not yours.
Which is where an independent adviser with market choice has a considerably different approach.
So do you want to do the leg work and deal with all of the insurers yourself, or do you want choice by going to an adviser who has that market access?
Why Advisers are useful:
The reality; going to an adviser gives you market choice and access. If you want that provided without additional fees, then it needs to be done on commission as advisers don't run their businesses for free.
If the NZ public was prepared to pay reasonable fees for the work and advice around insurance, we would have a very different market. However, consumers aren't interested in fees; they are quite happy for this cost to be buried in the premiums they pay.
After eight years discussing fee options with clients, none choose fees over the commission. It is a red herring that those outside the industry continue to bring up as an argument intended to undermine the industry.
We agree there are both trust issues, and the majority of people do not read their policy wordings.
We know consumers don't read their policies. As they still have them in their waterproof plastic wrapper when we sit down to review their cover. That isn't the insurer's fault, nor the adviser's.
However, the number of people that still have their policy in the waterproof plastic wrapper should be seen as evidence that they have a high level of trust with the adviser they have worked with.
They trust that they have got it right because they have not bothered to read the policy documents.
The reality, while Consumer can do its surveys, and most of the time the data is useful, when it comes to surveying insurance, especially life insurance, you'll find that a significant portion of those that responded either don't have insurance or have had a bad experience.
Because the majority of people are too busy for these types of surveys, as they are focused on other aspects of life, insurance is just too dull against the backdrop of the new TV or tablet.
It is the last thing people consider, well almost the last thing. Kiwi's attitudes to Wills is likely to be the last thing. As some 30-40% of those that die, don't have a will.
Moreover, less than 4% of these people are sudden deaths; the majority knew the end was coming and still didn't take care of it.
When we look at things in this context, it is no wonder we have such varied attitudes with people when they talk about insurance.
Why good advice matters:
To date, of all of the planning we have done and put in place, has worked to plan, bar none.
We have had significant success in arranging things in the way people want it arranged. Has it had issues, yes, because budget constraints have forced compromises in the cover taken.
Did clients know and understand this, yes, and this is where the difference between sales and advice happens.
We're not going to be able to insure every situation because people have medical issues and exclusions happen. Additionally, your premium dollar only stretches so far, which translates to longer wait periods, higher excesses, shorter payment terms, or less cover in terms of the amount of coverage.
So when we say it has all worked to date, we've had situations that have been on the fringe, they have been specifically excluded, or haven't been covered conditions. We've still had a go with the claim to get this covered, and sometimes we get lucky, which is why we continue to ask.
However, by and large, the luck with claims comes from putting the right cover in place for the right reasons, in the right way, at the start.
Then it no longer is a matter of luck; it is a matter of good advice, good decisions, and sound risk management.
What about your risk?
What is missing from the discussion about insurance is the discussion about good risk management.
The consumer needs to understand what this is, the adviser needs to demonstrate what risk looks like and how it can be solved, and the insurers need to have products, processes and solutions that meet those needs.
Fundamentally for us at Willowgrove Consulting, it is about understanding your risk and knowing you understand what those risks are before we proceed with any ideas on how to solve the problems.
Think you have risk but are unsure how to solve it?
Give us a call for a chat about what that might be and what you may need to consider.