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.

Question from Grant

We have a broker who argues the value he offers is when a claim is made. Thankfully we have yet to test this, but I can well imagine that neither my wife nor I would be in the best headspace to submit or let alone argue a claim with an insurance company. How does Pinnacle counter this point?  

Answer

There may be a lot of variability when you submit an accident claim for your car, or a health insurance claim. So maybe if an insurance broker goes in to bat for you it could be helpful in some circumstances.

But for a life insurance claim, it’s relatively straight forward… your are either dead or you are not dead. And ‘dead’ is usually quite easy to prove. All you need is a death certificate and Bob’s your late uncle.   

Given that Pinnacle Life is in the business of life insurance (not car insurance or health insurance) , Pinnacle Life typically doesn’t spend a lot of time haggling over claims.

So, would you better off if you used a broker to submit your claim? Personally I don’t see the point.

We’d like to comment on a story on Good returns in which Asteron’s Sean Carroll reportedly had this to say;

“The commission war over the past few months had done nothing for the industry, and as an actuary, he said he knew “exactly” how it is costing his competitors. Change needs to be customer-driven, and Carroll said he does not think the commission rates being offered are sustainable.”

We entirely agree with this comment, particularly about change needing to be customer driven.

Our view is this…

Selling more life insurance is not about hiking up commissions to levels well over 200% to incentivise brokers to sell more and more of your products. In fact, it’s not about ‘sales-push’ at all.

Selling more life insurance is about making products more relevant, more accessible (read internet) and more affordable.  

It’s about designing policies that people want to buy, not incentivising sales people to do the hard sell.

Following up on Steve’s post a few days ago regarding high commissions, thought a quick comparison of life insurance premiums across the NZ market would indicate just how much more efficient it is to buy your life insurance online.

Take a look at this simple comparison table for two 40-year-olds buying $300,000 life insurance cover…

 (All prices have been sourced from quotes on NZ website available to the public)

On average you can save over 20% if you buy on-line… go figure J

In June last year insurance commissions were in the news and we wrote this story on our blog. This month, commissions are in the news again. See this article posted yesterday on Good Returns.

We don’t really want to get into the debate all over again (yes, really…) but we think it is important for NZ consumers to be aware of what is going on in their life insurance industry.

In the story we are referring to, insurance companies are now paying commissions of 230% to get brokers to sell their products. Of course, these brokers are absolutely independent and are entitled to sell any insurance products they wish.

Now if you were a broker I’m sure you’d be happy to offer the product for which you’re paid say 150% commission rather than the product paying 230%. You’d always choose the product that’s best for the consumer. It makes perfect sense… wink, wink.

Anyway, as long as NZ consumers realise that buying through a broker chews up the equivalent of the first 2 years and 3 months of your premiums, plus a little more each year thereafter for the life of your policy, then that’s ok.

But it’s also worth knowing that this is one of the key reasons it’s around 20% cheaper to buy life insurance online.  

So, if you know how much life insurance you want, why not go online and save yourself a bundle?    

In July 2008 Pinnacle Life launched a policy called ‘Funeral Cover’.

Whilst the product is designed essentially for people over 50 (and many insurers call it ’50 Plus Insurance’) it’s available online to anyone aged 30 to 69.

What surprised us is the proportion of people in their 30’s and 40’s that have purchased Funeral Cover - clearly the product’s hitting the mark with Generation C… so to speak!

How does it work?

The entire application process takes around 5 minutes… after which you’ll have a policy covering your funeral for $5k, $10k, $15k or $20k. And the premiums offered for these cover amounts and for this type of product are the lowest in NZ. 

Best of all, being a ‘guaranteed issue’ product, Funeral Cover is offered with no health questions asked, and the policy is emailed to you immediately online.

And not only do the premiums stay the same every year, but once you turn 85, you totally stop paying – and your cover continues free of charge until you, ahem, expire.

And the extra bonus?

Your family will say great things about you at your funeral. See these ads from YouTube…

http://www.youtube.com/watch?v=V4FHeVWjGrc

http://www.youtube.com/watch?v=Nw0s4C0g5SM

 (It’s ironic that this latter video was the last advertisement directed by a popular Malaysian movie director, Yasmin Ahmad, who died soon afterwards of a stroke aged just 51…)

We recently presented the Pinnacle Life online solution to a large New Zealand corporate that was looking at alternatives to their current group life scheme they have in place.

The question was asked if there were any tax advantages to be gained by the company or the employees with a different form or category of contribution. We provided the following summation in response to the question posed:

Life Insurance contributions by a company are liable for FBT when;

·         an insurance policy where an employer takes it out for an employee and pays the premiums

·         an insurance policy of a life insurance agent or their family, where there is a discounted premium.

Life Insurance contributions by a company are not liable for FBT when

·          an insurance policy where an employee or family member takes it out and the employer pays the premiums – in this case, the payments are taxable income in the hands of the employee.

·         an insurance policy where an employer takes it out for an employee, pays the premiums and gains the benefit from the policy (the company or employer is the beneficiary of the product). In this case, the payments are not subject to fringe benefit tax, and are not taxable in the hands of the employee

In simple words, a group scheme policy where the company pays the premiums and the employee gets the pay-out in the event of death is taxed as an employee fringe benefit rate. 

In the event that an employee takes out a policy, and the employer then pays the premiums, payments are not subject to FBT, but the premium payment is treated as taxable income for the employee.

Where the company pays the premium, and is the beneficiary of the policy (often is the case for key man insurance) payments are not subject to FBT and are not taxable.

 Source:    

http://www.ird.govt.nz/fbt/categories/employer-contributions/fbt-fundsinsurancesuper-liableinsurance.html

Finally…

 Pinnacle Life has been able to remove the last remaining piece of paper from the process of buying life insurance.

Actually that’s not quite true.  The process was always 100% paperless if you paid by credit card or by internet banking, but not for direct debit payments.  To authorise a direct debit, you always needed to sign a piece of paper that Pinnacle Life conveniently attached to the policy document.

Happily, this is no longer so…

Now that the NZ banking industry has moved with the times, online direct debits have just become possible.

So at Pinnacle Life you can now authorise your direct debit and pay for your policy simply by ticking a few boxes and entering your account number on the Pinnacle Life website when you buy a policy.  (Buy a policy and see for yourselfJ)

Quick, simple, clean and… green.  Here’s to saving those forests.

When planning a family it is wise to consider taking out a life insurance policy before falling pregnant as insurance companies are reluctant about issuing life cover for a woman who is already pregnant, due to all the possible complications that could occur.

At Pinnacle Life, we generally learn about pregnant woman applicants in the question “are you seeking medical advice”. In order to ascertain the stage of pregnancy the applicant is sent to underwriting.

Our policy is to defer cover if the application is made after the second trimester (end of week 26).  We defer until two months after child birth…

 Why you may ask?

·         High blood pressure is a common complaint of pregnancy and can lead to hypertension and even toxaemia.

·         Once in your third trimester, it is very difficult to get life insurance as pre-existing medical conditions can advance rapidly during pregnancy and conditions not already picked up will become more dominant and detectable.

·         There is the risk of post natal depression immediately after the birth

·         An added problem to trying to secure life insurance for women is that we are now seeing a new generation of higher risk pregnancies being made available by the advancements in medical technology – not always a good thing. Pregnancy is increasingly possible in older women with IVF treatment. They are also more at risk from the complications of higher blood pressure. This treatment itself carries a high risk of multiple births, again putting a strain on the woman’s health.

Take out a life insurance policy before getting pregnant wherever possible. After the event, always be upfront in declaring your medical history.

When it’s Funeral Insurance Cover… so we’re told.

Six months ago, Pinnacle Life launched a $15,000 funeral insurance policy. But clearly, $15,000 is not enough.

Seems that by the time you’ve footed the bill for the burial, the stone and the unpaid credit cards and then the wake or Hangi, $15,000 of funeral insurance doesn’t touch sides for some families.

Well, now this is a problem solved.

Pinnacle Life’s now launched an enhanced Funeral Cover policy that allows you to select the cover you want – $5,000, $10,000, $15,000 or $20,000 at the click of a mouse.

No room for excuses now… just go online and buy funeral cover up to $20,000 in less than 10 minutes.