Should low income earners pay more for their life insurance?

Technically, yes!

It is a grim fact that men classified as having ‘low income’ will die on average 6.5 years younger than higher earners.  And for women, this gap is 4.7 years.

This means that low income men and women are at higher risk for life insurance… in the same way that smokers are higher risk for life insurers… and low earners (technically) like smokers should pay more for their life insurance cover.

I started thinking about this issue when a report from Otago University caught my eye.

According to this report, the life expectancy gap between rich and poor in New Zealand is not only significant, it’s widening! Over the 20-year period from 1981 to 2001, life expectancy for high earning men increased by 2.1 years and by 1.4 years for women.

So, do we believe that life insurance companies in New Zealand will at some point introduce a question on the Life Insurance application form along the lines… “How much do you earn?”

Nope, never!  (And nor should we.)

Yet… (believe it or not) it does happen in some countries… South Africa being a case in point.

If you apply for life insurance in South Africa, you will typically be asked to declare both your level of education and monthly income on the application form.  If your level of income and/or education is low, you’ll be quoted a higher price for your life insurance!

Talk about kicking someone when they’re down!  Tough place Africa.

The Sydney Morning Herald recently reported that a team of scientists at Boston University claimed to be able to predict – with 77 per cent accuracy – which of us will live to 100. (Also see NZ Herald)

The scientists did this by comparing the DNA of more than 1,000 centurions with that of the general population, finding a “genetic signature” that was linked to “exceptional longevity”.

What would happen if at some stage people are able to be “longevity tested”? What would happen if you knew that, failing an accident or a natural disaster, you’re likely to live to be 100?

And in particular, how would it affect your application for life insurance???

Standard life insurance premiums are based on the expectation that your lifespan will be that of the average person… in New Zealand that’s 82.2years if you’re female and 78.0years if you’re male. When you apply for life insurance, the insurer will ask you a range of questions to assess if you’re likely to die earlier than an “average” person of your age and gender.  If you are, you’ll be charged higher (loaded) premiums.

But Life Insurance companies typically don’t have processes to check if you’re likely to live longer than average… with a view to reducing your premiums.

So if you turned up at an insurance company with a favourable DNA test, you’d still pay the ‘standard’ rate.

Not fair, is it?

The first ever cancer-only insurance policy in NZ is now available from online provider Pinnacle Life.

What is Cancer Cover?

Cancer Cover is a form of stripped-down trauma insurance.

Whereas trauma insurance typically covers as many as 30 different ailments and is expensive, Cancer Cover focuses on the most significant of these risks, being Cancer. To put this in perspective, over 85% of trauma claims paid out by insurers relate to just three conditions – cancer, heart attack and stroke – and if you break this down further, 80% of these claims relate to cancer.

Cancer Cover is part of Pinnacle Life’s bid to win younger, price-conscious policyholders from the big insurers who dominate in trauma insurance.

Why does Cancer Cover appeal to younger consumers?

Many of the conditions covered and paid for under trauma insurance are related to ageing… such as heart attacks, heart bypass surgery, stroke, arthritis, Alzheimer’s and chronic lung disease. Whilst there is obviously some risk associated with these diseases for any consumer, more and more people in their 20’s and 30’s just don’t see the value in paying to cover these conditions. They see them as extremely low risk.

Any stats to support this?

• Cancer is the leading cause of death in NZ, accounting for 30% of all deaths.
• 1 in 6 people will be diagnosed with cancer between the age of 30 and 64.
• For females the biggest cancer killer is breast cancer. All women have a chance of developing breast cancer at some point in their lives.
• Breast cancer accounts for 17% of all female cancer deaths and around 1 in 9 women in NZ will be diagnosed with breast cancer at some stage in their lives.
• For males, lung cancer is the highest killer – accounting for 21% of male cancer deaths. However, prostate cancer represents the highest incidence of male cancer – 25% of all male cancer cases.
• In 2005 (latest NZ stats that I can find online) there were 18,610 new registrations of cancer in NZ and 7,971 deaths. This means there were almost 11,000 more people living with cancer than the previous year.

Why is cancer different to other ailments such as heart disease?

Cancer doesn’t correlate with age to the same extent that many other ailments do… even the young and the fit are susceptible. Like super-cyclist Lance Armstrong (testicular cancer in his 20’s), Wallaby rugby player Julian Huxley (brain tumour), cancer doesn’t respect how young or healthy you are.  It just happens.

And if you’re unlucky enough to be diagnosed with cancer, the financial consequences can be severe. You may need to take time off work. Or you may need to remodel your lifestyle, or you may need to find cash for to fund cancer treatment or medication.

That’s where Cancer Cover comes in… affordable cover that pays a lump sum if you’re diagnosed with Cancer.

Is Cancer Cover more affordable for younger people?

Pinnacle’s cancer policy pays up to $250,000 if you’re diagnosed with cancer. The specialised scope of the cover can save a bundle in premiums. A 40-year-old non-smoker in good shape with limited history of cancer in the family buying the cancer cover would pay only $19 a month for $100,000 of cover… compared with $37.55 that you’d typically pay for trauma cover in NZ.

You can get cancer Cover online in less than 10 minutes… and if you click here to buy, some extra cover will be thrown in free…

We heard this morning that the internet domain name www.insure.com traded hands for a cool NZ$21million, and this is regarded as the highest amount ever paid for a domain name, bettering www.sex.com by $5.3million. I needed to check the facts and found this reference…  and another one here…so we presume it’s entirely true.

Surprised?

We’re not.

Especially since the word ‘insurance’ is reputably the most expensive adword (paid search term) on Google.

But what does this all mean. Does it mean people are more interested in insurance than sex?  Yeah… right!

Clearly there is an assumption by businesses around the world that insurance lends itself to the internet and that there is money to be made in this way. It certainly puts paid to the theory (repeatedly trotted out by those regular, old fashioned, overpriced life insurance companies) that life insurance must be sold… and that people don’t buy life insurance.

I mean, come on… you think someone’s going to buy the domain name www.insure.com for $21mil if no-one buys life insurance online?

We’ve been saying for some time that life insurance is the next big thing on the internet.

Looks like someone’s paid $21mil to prove it.

This is a great way to start the year. It could even be your New Year resolution.

A couple of months ago we came came across this NZ Herald article that offered sensational new advice on how to live longer.

The advice is based on research that says “people treated unfairly at work who suffer in silence have twice the risk of a heart attack or dying of heart disease compared with those who vent their anger”. This is in line with what doctors have long believed; that unresolved anger can impact your health.

Conversely, if you get mad and let off a little steam every once in a while, you’re likely to live longer.

Why is this important for the life insurance industry?

Well… if everyone can live just a year or two year longer, this will be very good for insurance companies and consequently, will lower life insurance premiums. Imagine that!

The research.

The research that has underpinned this advice is published in the Journal of Epidemiology and Community Health.

Swedish researchers from the University of Stockholm followed 2755 male workers from the early 1990s to 2003. They took a range of measurements, including blood pressure, body mass index and cholesterol levels, and asked the men how they coped with unfair treatment or conflict at work. They recorded whether the workers used avoidance tactics, such as walking away from a situation, and whether they suffered headaches or other physical symptoms. There were 47 deaths from heart attack or heart disease in the group over the 10 years. After correcting for the degree of job strain the men were under, and biological factors, they found those who persistently bottled up their anger rather than expressing it openly were more than twice as likely to suffer from heart attacks or heart disease.

It’s only reasonable, therefore, that we should be allowed to rant at work. Shout at your boss. Yell at your colleagues. Let off steam.

Get mad.

Live longer.

Much longer.

November 17 to 23 is Diabetes NZ Awareness & Appeal Week. 

Diabetes is the result of the body not creating enough insulin to keep blood glucose levels in the normal range. It cannot presently be cured but it can be controlled and you can lead a full and active life.  

So what’s the link between diabetes and life insurance you may well ask? Well… plenty!  

Anyone who is unfortunate enough to have diabetes that’s tried to get life cover would know that it’s neigh on impossible to get. It is not just that the risks are high for insuring someone with diabetes, but it is almost impossible to calculate the mortality risk of someone who has diabetes.  

Translating this into plain English… insurers can’t offer a price for life cover because they can’t predict how the disease is likely to affect the sufferer’s lifespan. All they know is that in all probability, a person suffering diabetes is likely to die earlier than the average of the population… not necessarily from the disease itself, but from a range of complications and side effects that can be fatal… such as heart problems and neuromuscular problems.  

There are three types of diabetes which you can read more about on Diabetes NZ website.

According to Mike Smith, president of Diabetes NZ;

“There are now over 157,000 people diagnosed with diabetes in New Zealand. Of these, 142,000 have Type 2 diabetes and it is estimated there are 80,000 who also have Type 2 diabetes and have not yet been diagnosed and a further 400,000, with elevated blood glucose levels, who are at risk.”

“The figures for Type 1 diabetes are also rising at an alarming rate. Currently there are 15,000 diagnosed and around 10,000 of these are young people. Some research states this is increasing by at least 5% a year.”  

Daffodil Day is about raising the public’s awareness of Cancer and donating to the Cancer Society.

For us life insurance guys, cancer is always top of mind, because cancer is such a significant disease and one that many people insure for.

Insurance won’t stop you getting cancer, unfortunately. But it can help to make your life easier or the lives of your family and dependants. People take out life insurance so that if they die from cancer, their family can survive financially. Some people also take out Serious Illness (or Critical Illness) cover which pays them a cash lump sum, tax free, in the event that they contract and survive cancer. The money can be extremely helpful in allowing sufferers to restructure their lives, pay medical bills, pay off the mortgage or help make up lost income.  

See Serious Illness Cover online.

Cancer stats are pretty scary

·          1 in 6 people will be diagnosed with cancer between the ages of 30 and 64.

·         Cancer is the leading cause of death in New Zealand, accounting for almost 30 percent of deaths, slightly more than non-congenital heart diseases.

·         For females, the biggest cancer killer is breast cancer (17% of all female cancer deaths)

·         For males, the biggest cancer killer is lung cancer (21% of male cancer deaths) however the highest ‘incidence’ of cancer is prostate cancer (25% of cancer cases diagnosed).

Click here to go to the Cancer Society website or click here to see our last year’s blog on Daffodil Day.

That’s not my opinion, mind you. I’m just telling you what the New Zealand statistics for life insurance tell us.

I’m not referring to the fact that women live longer. And I’m not getting into the debate about whether women on average earn less. I’m busy looking at statistics that say for every three NZ men that buy life insurance, only two women buy life insurance. That’s a simple fact. To back this up, a survey released by AMP in 2006 found that “one member of the household tended to be the most underinsured – the mother”, and concluded that 70% of mothers either don’t have life insurance or have inadequate cover.

Of course, this could be a statistic exclusive to New Zealand so I thought I’d check with our Reinsurer’s Hannover Life Re. And guess what… the proportion is similar in Australia – out of every 100 people buying life insurance, around 60 are men.  

Why is this so?

Do women genuinely have a lower need for life insurance? Or are there other factors?  Maybe people who buy life insurance are typically family breadwinners and maybe this statistic is skewed towards men?  Maybe it’s a spill-over from our traditional male-dominated family model, where men worked and women raised kids? Or maybe it’s because insurance brokers are more typically older males and maybe they don’t tend to target women as much? Before I get carried away speculating why women are underinsured, I’ll let you into another statistic…

In the 2006 AMP survey, only 55% of New Zealand families (hey that’s men and women) were found to have life insurance. They also found that 67% of families in New Zealand are either underinsured, or are not insured at all. So whilst women are obviously the underinsurance culprits here, men aren’t off the hook either!

Back to the statistics… this one intrigued me most of all…

Over 90% of insured people believe they have enough cover, yet only 31% have enough life insurance to support their families for five or more years. Go figure.

Before I sign off, I’ve got one more really interesting statistic to share with you. Of those who purchased an ‘online’  life insurance policy from Pinnacle Life this past year in the 20 to 29 year-old age bracket, 60% were female. Hmm, it seems times they are a-changing…    

Ok, so today is Balloon Day in NZ. Not heard of it?  Well it’s the day of the year that the Asthma and Respiratory Foundation raise awareness of asthma and fundraise for the cause.

And as Life Insurer’s, we’re right into this because Asthma-related DEATH is one of the risks we insure people against.  Look at any life insurance application form and you’ll see a question about your history of asthma.

So is Asthma a risk? Really??

Everyone we know enjoys statistics, so here are some NZ stats (from the foundation’s website) so you can make up your own mind if Asthma is a problem:

·         New Zealand has one of the highest prevalence rates of asthma in the world.

·         15% of adults and 20% of children aged 6-14 have asthma.

·         Which means 1 in 6 New Zealanders – around 600,000 people in New Zealand, have asthma.

·         The indirect cost of asthma – including days of work lost, loss of healthy life due to disability and premature death – is around $700 million per year.

·         Severe asthma is common – up to 8% of teenagers and 10%

·         Asthma is the highest-ranking specific disease in terms of Years Lost to Disability in males, and third highest for females. 

Want more… can’t get enough stats and facts???… this is what we said last year on our blog about asthma…

Saw this cool article in Time magazine that explains why women live around 3~6 years longer on average across the globe.

The issue for us life insurance guys is not so much why females live longer, but what female longevity means for life insurance. The short answer is that because women live longer, they pay lower life insurance premiums. Bugger.

So what can us mere men do about this? Are we doomed to paying higher premiums because of genetics? Well, according to the Time article, there is something we can do… basically research tells us that the 3~6 year gap is only 30% genetics and 70% to do with environmental factors… the factors us men can actually control.  And let’s face it – there is little that men control these days so this is a very, very good thing!

So what are these controllable factors that cause men to die earlier than women? Apparently there are three…

• Men smoke more (although this gap is closing)
• Men eat more… particularly the foods that increase cholesterol
• Men deal with stress by internalising it rather than letting go the way women do.

 And that’s pretty much it. These three behaviours account for around 2~4 years of our truncated lives.

And that’s why we (us men) pay more for life insurance!!! Go figure.