We thought this would be a great blog because today, 26 June, is ‘International Day against Drug Abuse and Illicit Trafficking’  

What’s today all about?   

Around 10 years ago, the UN Office on Drugs and Crime, (“UNODC”) adopted a political declaration on the global drug problem, saying:  

“Drugs destroy lives and communities, undermine sustainable human development and generate crime. Drugs affect all sectors of society in all countries; in particular, drug abuse affects the freedom and development of young people, the world’s most valuable asset.”  

Today, UNODC aims to raise awareness of the major problem that illicit drugs represent to society. No individual, family or community is safe where illicit drugs take control.  Around 200 million people are reported to be using these drugs worldwide including

• 162 million users of cannabis and hashish
• 35 million users of amphetamine, methamphetamine and ecstasy
• 16 million users of opium, morphine, heroin and synthetic opiates
• 13 million users of cocaine. 

So, how about life insurance for drug users?    

Mortality statistics indicate that people using illegal drugs will have shorter lives… the heavier the user the shorter the life!  

Drug users are more likely to die earlier from any number of causes, such as respiratory problems, immune disorders, cancer, heart problems, stroke or an accident.     

So… if you have a history of consuming illegal drugs you could potentially be heavily loaded… even as much as 200% to 400%.

The heading says it all, doesn’t it. But if you want more, read on.  

This NZ Herald article announced a 62%increase in internet banking usage over the past 3 years measured against a 23% reduction in the patronage of bank branches.  

If you think this is just another internet statistic, think again.  It’s a ‘generational shift in consumer behaviour’.  

To be more precise, it’s the collective behaviour of new consumers that no longer have the patience to stand in a queue.  For this generation, ‘face-to-face’ is yesterday’s model. The internet is now the ‘channel of choice’.  

‘Generation C’ is here – those internet-savvy consumers that don’t have time to waste. And whilst they’re typically under 40, this is not a generation based strictly on age like Gen X and Gen Y. Gen C are people of all ages! It’s not an age thing – it’s an attitudinal thing to be Generation C. I regard myself as Gen C and yes… I’d love to be 40 again!  

Gen C consumers expect things to happen quickly and efficiently and they prefer to do their business in their own time and place. An answer to a question is usually only a mouse-click away. Products and services are just mouse clicks away. And if it can’t be done with a mouse… then why bother?  These new consumers are impatient… very impatient. They understand that time is money. They understand that the old model of meeting and greeting costs more and this means they’ll get back less. So they expect – when they do it online – that it will be faster, it will be lower cost and they will save money.   

Our prediction… like internet banking and airline ticketing, life insurance will one day be mostly transacted this way. Obviously we can’t wait.

It’s a fact. The very people that need life insurance the most are the same people that life insurance companies want the least.  

And so it happens, occasionally, that life insurance companies have to deal with very sick applicants with only weeks to live, hoping to get a life insurance policy – so their loved ones can ‘hit the jackpot’ so to speak.  

We really enjoyed this life insurance prank we found on Youtube. 

What’s interesting if you look down the list is the gap between top and bottom… 78% to be exact. 

Our point – you really don’t have to pay top dollar for life insurance. And you don’t have to believe that big companies deliver lower costs. And at the end of the day, it’s all the same cover.  

We’ve done some of the work for you – you make the choice.

So… the industry is back on the subject of commissions for life insurance.  This was a hot topic a year ago and seems it’s back again. And some of the comments we made on this blog last year caused a stir! 

This week there were articles in the NZ Herald and on Phil’s Blog. The discussion is once again about the level of commissions with one industry commentator saying “Brokers selling life… insurance are earning excessive commissions and ultimately the consumer is paying for it in higher premiums.” 

A year ago some insurance companies were paying brokers as much as 220% commission to sell a life insurance policy and as far as we understand this hasn’t changed much.  Sounds a lot, doesn’t it?  But is it fair?  Does the consumer pay at the end of the day? Is it sustainable? These are the questions being asked once again.  

So what do we think?  

One comment I read today from an insurance broker made an interesting point.  He said “I reckon anything up to half the commission’s spent running around with forms, [personal medical reports], negotiation with underwriters, avoiding non disclosure and offers of terms”.   

Yes, exactly.  The problem is NOT that insurance brokers are being over-paid… the problem is that the traditional life insurance companies have made life so complicated for brokers that they end up having to work a lot harder than they really need to, just to make a single sale.  The high commissions are just a necessary cost of business inefficiency. It all gets ‘burned’ up in wasted time. And at the end of it the consumer doesn’t win either – because the commission is simply factored into the price.  

Pinnacle Life has solved a big part of this problem.     

Most people realise that Pinnacle Life sells online - direct-to-consumer. But what many people don’t realise is that brokers also sell Pinnacle’s life insurance products – and with the products, they provide advice. Consumers don’t pay more if they use a broker, they get the advice thrown in and Pinnacle Life pays the broker.  But the difference is that Pinnacle Life only pays around 1/3 of what those insurers with the deep pockets pay.  

How does Pinnacle Life manage to retain its very good brokers paying them 1/3 of the industry rate?  

Through its Intelligent Life technology platform, Pinnacle Life enables brokers to issue policies to their clients in a fraction of the time – online.  

Imagine… insurance broker leaving client and waving goodbye… client busy printing off a hard copy of his/her policy!  Pinnacle Life’s brokers are probably making more money on 1/3 commission AND their clients get the lowest price in NZ.  It’s just smarter business.  

So, whilst we’re NOT against advisers being paid high commissions (because otherwise they couldn’t survive), we’re against the traditional  life insurance companies using commissions and overseas jaunts (funded by the client) as a strategy to drive more sales. It begs the question… why can’t they offer some other real value-adding option… like better products, services or distribution processes that assist brokers? Wouldn’t that be of more benefit?  

And what of the insurance brokers that don’t sell Pinnacle Life products? Well, you’ll need to ask them. Maybe they just need to do the math…:-)

You know you’re spending too much time looking at other blogs when you notice someone writing a comment about seeking life insurance quotes – online!  The quote was for a 37 year old non-smoking female seeking $600,000 life insurance cover.  

It was pleasing to see Pinnacle Life shown as the lowest quote out of nine life insurance companies. But of course this was no surprise to us.  See the post here showing nine quotes. 

So we thought it would be worthwhile running a similar exercise for males.  

We got ten on-line quotes… monthly premiums shown here – highest to lowest…        

Quotes** for a 40year old non-smoking male seeking $600,000 cover.  

                                Online                 Via a Broker   

AA Life                 $58.24                   (unavailable)      (This is for $400,000 - the max they offer)  

ING                      $55.49                   (not listed) 

Sovereign             $46.78                   $51.42                   

AIG                       $45.68                  $48.30 

Tower                   $45.45                   $50.50 

Asteron                $44.89                   $49.88 

Fidelity                 $43.76                   $48.13 

AXA                       $43.29                   $44.57 

AMP                      $42.37                   $47.37  

Pinnacle Life         $40.37                   $40.37   

Yes, Pinnacle Life does distribute through brokers as well as on-line direct to consumers but as you can see, there is no difference in what you pay.  How does Pinnacle Life achieve such competitive premiums?  Simply by being a specialist life insurer and being very efficient at everything it does. 

**These quotes were all taken off NZ websites on 1 June 2008.