Mental health is one of those medical conditions that can be difficult to ascertain either the severity or likelihood of a relapse. The underlying cause of the health condition may well be the work environment.  Co-workers, deadlines, responsibilities and team work all take their toll on one’s mental health.  A toxic work environment of bullying, over expectation and job insecurity can be huge influences on an employee’s of mental health. This is not limited to blue collar workers; senior managers are caught up in delivery deadlines, ROI expectations, human resource problems and the burden of board expectations.

1 in 5 New Zealanders suffers from a mental health condition. Most of these people are employed.  “The Mental Health Commission considers that employment is a critically important contributor to recovery from mental illness. Many people affected by mental illness succeed in employment without any special consideration or support.”  Ensuring an environment that works to improve workplace mental health is likely to help retain these people in the workforce.  Unfortunately, the Ministry of Health focus appears to be on getting those who are more severely affected back into the workforce. While this is important, more resources should be allocated to supporting the 4 out 5 who are employed, but are vulnerable to relapse or mental health deterioration brought upon by workplaces stresses.

In underwriting an individual’s mental health for insurance, insurer’s  would be better off asking questions about their employer’s actions, support and resources for dealing with employee mental health, rather than asking just for the individual’s historical mental health records.

Job security and a healthy work environment is one of the best medicines for mental health.

Some references:

• A wonderful resource for both employers and employees help deal with workplace health issues www.workplacestrategiesformentalhealth.com (Unfortunately the legal resources are naturally Canadian in focus)
• You can test your knowledge about some workplace mental health issues. Take the Mental Health Quiz!
• Mental Health Commission: A literature review: Prevention and Possibilities. www.mhc.govt.nz

Why are articles about buying life insurance typically bad news?

Take for example this article by Diana Clement a few weeks ago in the NZ Herald, which highlighted;

• 45% of Kiwi families have no (that’s ‘N’…‘O’) life insurance cover at all.
• Just 0.9% of Kiwi household expenditure in 2010 went on life insurance… down from 1.1% in 1995!

All we (in the life insurance industry) want to know is… why?

Why can’t we get people to whip out their credit cards and fight each other over the best deals on life insurance – just like they do at the Apple store? I mean, what’s the matter with people that prefer to buy wonderful new gadgets and gismos ahead of life insurance to keep their loved ones afloat if they were to die suddenly (did you catch those violins??).

And then a couple of days ago I came upon this article and wondered if it miraculously offers us the elusive reason why people avoid buying life insurance.

The article is entitled “Cost Perception May Deter Life Insurance Sales”; and that pretty well sums up the contents. What was interesting is that this article is not based on ‘opinion’, it’s based on market research carried out by LIMRA.

Survey respondents in the US were asked to estimate the annual cost of a $250,000 life policy for a healthy 30-year old. Whilst respondents on average estimated the cost would be around $34/month, the actual cost was in fact closer to $12/month.

So, on average, people who have no insurance assume the cost of life insurance is almost 3 times greater than it actually is.

Imagine if you thought the average Apple computer was around $7000.00.

Would you still be that keen to fight your way into an Apple store to play with the toys?

Hmmm.

Ever tried to build a sandcastle on the beach with an incoming tide? No matter the walls or moats you place round the castle, we all know the tide eventually wins.  When it comes to online life insurance, the same is true. There’s no holding back the incoming tide. One can use this analogy when you read all the winging going on by financial advisers in relation to CIGNA’s  new online income protection offer.

As usual, there are wails of protest emerging from financial advisers. “Selling income protection without advice is irresponsible”   “…outrageous…only a matter of time before the first claim arrives at the insurance ombudsman door”.  If you would like to see more read go to Good Returns

But what is all this protest based on?

Is it reasonable for financial advisers to assume consumers can’t read and understand a policy document?  Is it reasonable to believe the services of a financial adviser should be thrust upon consumers who prefer to manage their own financial affairs? Is it not short-sighted and arrogant to believe the insurance industry will be unaffected by the internet? Is it reasonable for advisers to suggest they alone have a plethora of options and tools available to determine the consumer needs, and that they alone are better suited to find the best fit?

Agents appear to find the internet a convenient place to voice their opposition and find leads,  why the resistance to use the internet as a knowledge base and purchase tool for consumers? Truth be told, they see it as taking the crumbs off their plate. Unfortunately, that’s competition, and we all know the benefits of competition for the consumer.

Five years ago Pinnacle Life was a trail blazer; today Pinnacle has many competitors in the online space.  Any financial adviser who believes that selling life insurance is strictly their domain is living in a stand castle. Unless they start to reposition their offerings and deliver value add, the tide will wash many of them away.

Churn continues to pester the life insurance industry.  Insurance churning is the practice of cancelling an existing life insurance policy placed for a client with one Insurer and re-writing that some policy with another Insurer in order to generate a new commission from the account for the broker. Unfortunately due to high upfront commissions paid for life insurance products in New Zealand, churning is almost, dare I say it, incentivised.

This commission paid upfront to the broker is generally about 200% of the first year’s premium, with a provision that should the policy fall over (lapse) within the first 24 months, the Insurer will have the right to claw back a proportion of the commissions paid. However once the policy has been in force for 2 years, if the insurance policy is then cancelled, the Insurance company will have no recourse on the commissions paid.

A motivated broker can possibly find a myriad of reasons why the policy should be moved; but the easy sell rests with;

• A new clause in another Insurer’s policy makes it more attractive, or better suited for purpose
• Price changes have rendered the existing policy uncompetitive in today’s market

The broker will tell you hand on heart, they moved the business to another insurer in their clients best interests “I saved him some money” or “that policy did not cover disease XYZ”. While these reasons may be valid in some cases, in most instances the motive to change is the lure of a new commission.

Most people are in business to maximise revenue. Brokers are no different. If a broker can move their client’s business say every 4 years, they stand to earn commissions multiple times on that same client. On the flip side, Insurers are continually paying commission to get that client onto their books (albeit temporarily).

The exacerbation of the problem is highlighted in the emergence of Partners Life. A new Insurance brand with substantial new business growth in a very short time. Not because Partners Life has embarked on a strong marketing campaign, (few members of the NZ public would even know who they are), but because they have embarked on getting the independent brokers on their side. How do they do that?

1. Pay top dollar commissions for new business
2. Design their premium structure in such a way that 55 to 65 year olds pay a little less than the market average. In this way brokers can move the business sighting the savings they provide their client

Interestingly, few brokers churn their policy to Pinnacle Life, who do have the lowest price across all age groups. Why? Well they don’t pay anything like the commissions available from other NZ insurers. Which makes you wonder about the broker’s justification? It’s more about self-interest than client-interest. And we all know who pays the price for churn in the end.

A few years ago I wrote a blog about obesity, the conventional wisdom being that obesity is bad for you… in fact it’s likely to kill you. That’s what all the studies show. And because the statistics show that you’re likely to die earlier than an ‘average’ person in the population, you’ll be charged more for life insurance. All perfectly logical.

But now I’m confused.

A recent Canadian study (reported here) concluded that people who are overweight live longer than people who are classified as “normal” weight. Not only that, but people who are classified as ‘significantly’ overweight also live longer.

The study of nearly 12,000 people, led by Statistics Canada’s Heather Orpana, was devised to estimate the relationship between body mass index and mortality in Canadian adults.

Results…

• Being overweight was associated with a 25-per-cent lower risk of dying
• Being obese was associated with a 12-per-cent lower risk of dying.
• The risk of dying for a morbidly obese person was statistically the same as the risk for people of “normal” weight.
• Underweight men are at greater risk than any other weight group.

Was this a once-off study with flawed results? It appears not.

In 2005, research undertaken by the US Center for Disease Control and Prevention published a study with similar findings. (At the time prominent health experts were outraged.)

So, if this research is indeed true, what does this mean for life insurance?

The simple answer is that overweight people would get cheaper life insurance premiums.

Imagine that.

An insurance joker once professed, “Insurance employees don’t need titles on their business cards; white shirts actuarial, blue shirts marketing, black shirts underwriting”. Underwriters are viewed as the morgue of an insurance company, “the policy prevention department” as my business partner once put it. Assessing individual mortality is part science and part luck. But the advances made in genome sequence are going tip the scales greatly towards the world of science.

The X Prize Foundation is offering US$10M to the first team to sequence the genomes of 100 centenarians.  In layman’s terms “find the genetic code for those that live beyond 100 years”.  The competition starts Jan 2013, and the sequencing has to take place in 30 days.  The competition aim is two-fold. First, find a way in which genomes can be sequenced accurately in a relative short period of time, second, determine what genetic pool is consistent with longevity. No easy task apparently (read the article in the economist for more info).

Back to the black shirt underwriters. The ability to sequence genomes quickly will make the cost of getting a report on an individual’s DNA make-up much more affordable. A hair sample will give an underwriter an accurate description of the likelihood of all or any serious alignments that may linger, and a much better view of longevity. No more blood or urine tests; simply send a hair sample and with-in minutes the underwriter will have a health assessment waiting on their PC with the aid of some ingenious piece of software. The push to economise genome sequencing is going to revolutionise the underwriting world, and my pick is it is going to happen a lot quicker than underwriters are prepared for.  Resistance to change will fall by the wayside when their masters learn of the cost savings to be made, and the improved outcomes these new techniques will deliver, particularly when underwriting for critical Illness and disability products.

The tag-line of the future?……  Life insurance premiums as unique as your DNA

Life insurance can be murder…

People buy life insurance, why? So that if they die unexpectedly, they’ll leave loved ones a bucket of money to keep them going. It’s simple really.

But what if the insured person doesn’t die unexpectedly?

It seems that sometimes ‘loved ones’ are capable of providing a little help.

Here’s a story from South Carolina, US, where a woman was charged with murdering her ex-husband, her stepmother and her two sons no less – all for the life insurance money.

Is there a moral in this? Not sure. But if you’re looking to take out a life insurance policy, at least make sure your beneficiaries are truly your loved ones.

Insightful question received from a reader…

Q

I would love to buy life insurance but I have one concern. If insurers cover you until you are 100 years old, there’s a 100% chance the insurance company will have to pay you the amount you are covered for.

I have put together a spreadsheet with a $30/month payment and interest at 8% pa. I could not save even $250,000 in 50 years, whereas if I die, the insurance company would have to pay out $420,000 – the amount I covered myself for.

What am I missing here?  How come the insurance companies don’t go broke?

Thanks, Roxanne.

A

Thanks for this Roxanne.

There are a few things that you haven’t factored into your spreadsheet.

Firstly, a life insurance policy that covers you until you are 100 years old would have a monthly premium that increases each year.  This annual price increase takes into account the fact that your risk of dying increases each year, as you age. In the first year you may be paying $30/month but after say 20 years you would be paying something like $200/month. So you’ll need to factor this annual increase into your spreadsheet numbers.

Secondly, a large proportion of people taking out life insurance cancel their policy long before they die.  Life insurance is like car insurance in some ways… you only need car insurance while you have a car. Once you sell your car, you can stop paying the insurance and cancel your policy.

Most people don’t continue with their policy past age 75. Besides the fact that it gets very expensive, the purpose of life insurance is to financially protect those people that are dependent on you. By the time you are 60 or 70, most people don’t have financial dependants – their children generally have their own income. So they no longer need the insurance and they stop paying.

That’s insurance for you… collecting premiums from the many, only to end up paying the few.

Great business:-)

Movember is an annual, month-long celebration of the moustache, highlighting men’s health issues, specifically prostate cancer and depression in men.

Who can we blame for this initiative?

Look no further than the Movember Foundation – a global not-for-profit, charitable organisation which runs this Movember celebration of men’s health.

For the record, the idea for Movember came about in 2003 when a few mates having a beer in a Melbourne pub recognised that men were lacking a way to adequately promote men’s health and came up with the idea to bring the moustache back for one month, and in doing so, have some fun, raise money and hopefully encourage men to talk about their health.

So why are we talking about Movember on a life insurance blog???

Because we in the life insurance business are impacted by the very health issues highlighted by this initiative – particularly prostate cancer.

Did you know?…

• Prostate cancer is the most common cause of cancer-related death in men (3.8%) behind lung cancer (6.1%) and bowel cancer (4%)
• In NZ, around 2000 to 3000 men are diagnosed with prostate cancer each year.
• There are generally no early warning symptoms for prostate cancer
• All men over the age of 50 are at risk of prostate cancer and should be tested annually
• If you have a history of prostate cancer in your family you should have tests from age 40
• Prostate cancer is curable if detected and treated early
• Men are not bullet proof. (Yep, it’s true… men get cancer too)
• You can get a Cancer Cover policy online that pays you a lump sum up to $250,000 if you’re diagnosed with cancer.

According to this report, the Rapture which failed to take place on 21 May 2011 as predicted, will now take place today (21 Oct 2011).

Read our previous blog on this topic.

The problem with the Rapture is that we don’t know who exactly will get the highly desirable heavenly call-up and who’ll be discarded to face hell on earth. If you’re the family breadwinner and you’re raptured away, will your family have the financial resources to continue living their devilish lifestyle without you?

Have no fear… that’s where ‘Rapture Insurance’ comes in.

Rapture Insurance (read ‘Life Insurance’) is hellishly simple. You get raptured and the insurance company pays a cash lump sum to your surviving, earthbound family.

Better still, you can buy this insurance online, all done in just 10 minutes.

With just hours to go, there’s no time to waste. Get insured now… click here!