We saw this clause in a life insurance policy the other day and we simply had to share it.  

“If You don’t pay the premium when due, or the premium deduction from your account can’t be made, then if the unpaid premium was the first premium, the Policy will not operate at all, or if the unpaid premium was a premium other than the first premium, We will allow 30 days from the due date to make this payment. If We have not received payment by this time, We will send You a notice telling You that We will cancel Your Policy if the premium then due is not paid by the date shown in the notice. This date will be at least 28 days from the date of the giving of this notice. If You do not pay the premium by that date We will cancel the Policy and the insurance cover stops.” 

Anyone who can make sense of it, we’d appreciate a translation…

Received this question from a reader and felt it was worth posting as a Q & A for other readers… 

Q 

My question is, if both die at the same time, what happens? I’ve been shopping around for a life policy for me and hubby and we could not decide if we should get one each, or a joint one. I don’t know if there is a payout if both die. If the answer is yes, does the payout go to the estate? And what if if both die and no ones knows this policy exists? Thanks

A 

If you have a joint policy and both of you die, then the policy pays on BOTH lives. This is the case if one person dies before the other (as is normally the case) or if both die at the same time (as sometimes happens in an accident). 

Who does the payout go to?   The simple answer is “…whoever are named as beneficiaries in the policy”. (Note that under some policies the beneficiary is defined as the owner(s) of the policy so you may not necessarily see the term ‘beneficiary’.)

Example… lets suppose John and Mary have bought a joint policy. 

Mary may be named as the beneficiary in the event of John’s death and lets say John is the beneficiary in the event of Mary’s death.

If Mary and John die together, then there are two payouts.  The payout on John’s life goes to Mary’s estate and the payout on Mary’s life would be paid to John’s estate. 

If John dies first, Mary receives a payout.  If Mary dies first, John receives a payout. 

But what happens after John dies and Mary receives a payout?   

Mary has a decision to make… to keep the policy going or not. If she continues to keep it going she must continue to make the payments and (since John is dead) she should nominate a new beneficiary… maybe a child? This should be a simple administrative matter. 

The problem with a joint policy that we identified in an earlier blog post is where the parties separate or divorce. Splitting the policy can become a real problem because all owners of the policy must agree… see earlier blog post.

The launch of our electronic underwriting was announced in Scoop earlier this week.

Scoop: Wednesday, 14 November 2007

Pinnacle Life today launched a next generation version of its electronic underwriting that should see a higher number of first-time applicants issued with immediate life cover. 

See the full story in Scoop…

Pinnacle Life today launched a more advanced version of its electronic underwriting that should see a higher number of first-time applicants issued with immediate life cover. 

Pinnacle Life first launched its direct-to-consumer life insurance with electronic underwriting in May 2007.  The buying process from application to issuing the policy is fully automated via its website, with consumers receiving their policies online. Visitors to the website are led through a series of typical insurance underwriting questions covering their health, lifestyle, occupation and pastimes. Those with no indicated health issues are covered instantly and receive their policy document electronically.  “To date, applications have exceeded expectations” according to Steve de Jong, a partner at Pinnacle Life.  

The upgraded website boasts an increased range second-tier questions that get asked if certain primary health conditions are indicated during the application process. 

The new software automatically assesses mortality risk and automatically applies loadings or exclusions to a policy without human involvement.

The entire process takes less than ten minutes, by the end of which full and immediate cover up to $500,000 is granted without the need for a medical examination, unless certain specific conditions are highlighted.  Pinnacle Life Partner, Ed Saul, said, “We’ve been working closely on this new release with our reinsurer, Hannover Re for several months now and we have high expectations it will meet with consumer approval”.  “Our consumers are the internet-savvy ‘Generation C’ and the estimated 1.3 million New Zealanders who now buy online (source: Nielsen NetRatings).”  

Growth in insurance premiums in NZ is reported by the ISI as 8% for the year ended September 2007.   

But what does this really mean?  Is it a good result for the industry?  Can we all relax now?Let’s think about this logically for a minute.   

This means that if the industry did absolutely nothing… other than replace policies that lapse, we would in any event see a 5% to 6% increase in premiums collected. 

Now take into account that house prices have increased by probably more than 3% over the past year and that this is one of the significant drivers of the need for life insurance.  Also take into account that around 20,000 young people came into the life insurance market with ‘new needs’ for life insurance last year (getting married, having children, buying homes, taking loans, etc) and we see that in all probability, life insurance coverage went backwards. 

The question is ‘why?’   

As people who work in the life insurance industry well know, one of the biggest assets a life insurer has is the relationship it has with its ‘reinsurer’.   

Pinnacle Life’s relationship with its reinsurer, Hannover Re, stretches back 10 years.   

The Hannover Life Re underwriting team based in Sydney were instrumental in the development of the Intelligent Life online underwriting system that is at the heart of Pinnacle Life’s breakthrough offering.  In assisting us with our design, we asked Hannover Re to think outside the square, to think ‘innovation’ and to think ‘world first’.   They did.   

We’re proud to be working with this team, without whom we would never have launched.  We’re also pleased the feeling’s mutual.   

This from

   Hannover Life Re of Australasia (HLRA), Australia’s largest Life Reinsurer, are very proud to be affiliated with Pinnacle Life and Intelligent Life – Pinnacle’s internet based insurance application system.  

We have worked closely together with Pinnacle in the development of this revolutionary site, and are very proud to witness the success Pinnacle are having with this. 

We see this as the way of the future for our industry, particularly for Generation C who do not have the time, nor the inclination to deal with the traditional adviser and paper trail that has historically been necessary to obtain life insurance.  

Intelligent Life allows Generation C to take control of their life insurance needs, at their convenience, according to their time constraints, not someone else’s – a must in today’s fast paced consumer environment. We look forward to our continued association with Pinnacle, and to taking Intelligent Life to the next level. 

Tracy Peterson, Chief Underwriter, HLRA  

Pinnacle Life was profiled by Barbara Weil in Business to Business online magazine this week.  The story reads…   

“Two Newmarket based partners have developed a world first, making it possible to buy life insurance online. Ed Saul and Steve de Jong of Pinnacle Life are specifically targeting the internet savvy 1.3 million New Zealanders who buy online. 

To check it, visit www.pinnaclelife.co.nz. “Life Insurance now joins travel, books, music and more as the latest online commodity and premiums can be up to a third cheaper than that offered by traditional insurers,” Steve explains.  “Even better, buying a policy online takes minutes instead of days and everything is in plain English – there’s no legal jargon that can confuse people.” ….”  

See the complete article on the Business to Business website…

This article on predictive testing for Alzheimer’s got me thinking.

Genetic testing and screening techniques for a whole range of potentially deadly diseases are just around the corner.  We’ll soon know just how disposed we each are to dying of any number of diseases, simply through testing.   So what does this mean for the world of life insurance?

The point of life insurance is to protect ourselves against the unknown.  We don’t know when we’ll die and we don’t know what will cause us to die… so we take out life insurance.  And what we pay for life insurance is based on statistics.  This is the domain of those mysterious people called ‘actuaries’.  Life insurers gamble on the fact that if our parents lived to a ripe old age and we have no symptoms of ill health today and we lead a good clean lifestyle, then we are likely to live at least as long as the average in our population.  In effect, the life insurer takes a calculated risk. 

But what if tests could prove that in spite of my apparent health, I am likely to die of a specific disease… and that I am not likely to live as long as the average person?  What happens when life insurers get this information?  What happens when the ‘unknown’ becomes the ‘known’???

Quite simply, life insurers will use the info to calculate my risk. My genetic conditions would probably be treated as ‘pre-existing conditions’. The insurer would likely either exclude the genetic conditions indicated by the testing or they may charge me higher insurance premiums…. and this starts to cut across the very reason I want life insurance - I want the life insurance company to cover my risk of dying – not exclude or load them? 

Potentially life insurers would move from ’pooling risk’… to ’excluding’ risk.

A lot of water yet to flow under this bridge, to be sure.  Interested in your views….?

(See this article on benefits and risks of genetic testing)