3 common insurance concerns
I became a life insurance adviser in 2010, since then I’ve noticed three consistent concerns around life insurance in New Zealand. It’s frustrating to read the rants from the general public and media as there are already working solutions for the three main insurance issues noted below.
1. “Insurance advisers get paid too much commission.”
Unfortunately, the industry standard of high upfront commission and low ongoing service commission can be abused advisers who put their interests above the interest of their clients. The simple solution is the alternative commission structure which has been available for the last ten years, which is a low amount of upfront commission, and higher ongoing service commission. This encourages advisers to properly look after their clients on an ongoing basis (not that advisers should need an incentive to do this – it should be par for the course).
Long-term, this commission structure is good for the insurer, adviser, and most importantly, the client. If this were the only option available for commission, we would see a large number of advisers who are only in it for a quick buck leave the industry – which would be a good thing!
The FMA, insurers and advisers need to take a stand on this to restore some of the credibility to the industry that has been lost over the years.
2. “Insurers never pay claims.”
Insurers DO pay claims: Sovereign alone has paid out $1,631,203,192 in the last five years.
The most common reason for a declined claim is medical non-disclosure. Fortunately, there is a simple fix: we ask all our clients to get a copy of their medical history from their doctor to submit with their completed application form. A small amount of time and effort at application time can eliminate doubt and stress at claim time. Insurers are more accommodating when assessing medical conditions at application time than at claim time.
Ultimately, it is up to the adviser to inform the client of the importance of supplying all necessary medical information to the insurer. To the detriment of their clients, some advisers simply cannot be bothered with this step, and have an “I’ll deal with it if there’s a claim” attitude. If your adviser didn’t ask you for your medical history, we strongly recommend you get a second opinion on your insurance.
3. “Life insurance becomes too expensive later in life.”
Again, there is another simple solution. “My insurance premiums keep going up” is a constant gripe from Kiwis, yet level/fixed premium insurance has been around for decades. I’d estimate 90% of our clients take up a portion of level premium cover.
The reaction from most people when we educate them on the long-term savings potential of level premium cover is that they can’t believe it hasn’t been mentioned to them before. It’s obvious there’s a high demand for it, but not enough advisers are talking about it with their clients.
Life insurance is usually a long-term requirement, so it makes sense that it remains affordable long-term.
This article was written by Finsol’s director and senior insurance specialist Gareth Dobson. If you have any questions please contact him directly on 06 650 5162.