When I saw the statistic that 632,920 New Zealanders were injured in their homes last year I thought there must be some mistake… maybe an extra zero. But nope, the number is correct.

With a total population of only 4.4mil people in New Zealand, this means around 1 in 7 people are injured at home each year. That’s like 5 to 10 people in every street in New Zealand ended up in a doctor’s waiting room or a hospital because of a home accident.

However, if we drill a little deeper into these numbers we notice that 621 people died in home accidents last year…  more than the total number of people killed in road accidents and workplace accidents combined!!

So what does this mean for life insurance?

Well… typically, if you engage in dangerous pastimes such as abseiling, rock climbing, sky diving or hunting, or if you are employed in a dangerous occupation such as working on an oil rig, you’ll be charged a higher price for your life insurance.

It sounds like we should be adding one more dangerous occupation/pastime to the list… staying at home!

Almost 3 years ago, Pinnacle Life launched a policy called ‘Funeral Cover’, an insurance policy that pays up to $20,000 to cover the cost of a funeral.

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

What continues to surprise 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 a younger audience than we had initially envisaged.

How does Funeral Cover work?

The entire application process takes around 5 minutes.

Unlike most life insurance products, the premiums for Funeral Cover remain the same every year, without increasing. And once you turn 85, you totally stop paying – and your cover continues free of charge until you, ahem, expire.

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

And the extra bonus?

Your family will say great things about you at your funeral… see this ad on YouTube and you’ll see what I mean!

I read an article in the Economist recently about lonely people being more likely to get ill.  Lonely people, it seems, are at greater risk than the gregarious of developing illnesses associated with chronic inflammation, such as heart disease and certain cancers. According to a paper published last year in the Public Library of Science, Medicine, the effect on mortality of loneliness is comparable with that of smoking and drinking. It examined, and combined the results of, 148 previous studies that followed some 300,000 individuals for an average period of 7.5 years each, and controlled for factors such as age and pre-existing illness. It concluded that, over such a period, a gregarious person has a 50% better chance of surviving than a lonely one. Ref: http://www.economist.com/node/18226813?story_id=18226813

Ed and I recently returned from the USA, where we learned that Life Insurers place a much larger emphasis on moral underwriting. A life insurance application will always have a motor vehicle and felony report attached to help determining risk. Insurers and re-insurers will determine mortality rates based on channel delivery experience. For instance, if you apply for life insurance through an employer scheme, you’re far more likely to get offered better rates than if you apply say by phone to a call centre. History of employment has long been deemed a better indicator of mortality than a health report.

Which brings me back to my original thought, imagine the day we asked applicants for access to their FaceBook or LinkedIn profile? A FaceBook user today is loner if he has only 400 friends. Social network users today are life insurance buyers tomorrow. A FaceBook diary is an accurate chronicle of one’s life. FaceBook and LinkedIn could be used as better mortality indicators than a medical test. So should we ask for your Facebook link rather than your medical record? Tomorrows underwriting is a social network link away. How soon cometh the day?

A survey released in the US found that 69% of single parents with children still living at home are uninsured… confirming that children of single parent homes are at greater risk of enduring financial hardship if their sole provider were to pass away.

Whilst this was a US-based survey and not a Kiwi survey, we suspect that a similar study in NZ would turn up similar results. This would be consistent with many studies that have been carried out around the world highlighting the problem of people being under-insured.

Specific results of the survey were these…

• 79% of single men and 66% of single women with dependent children, and who earn less than $50,000 per year, have no life insurance
• 79% of single men and 56% of single women with dependent children, and who earn between $50,000-250,000 per year, are uninsured.

The survey suggests that single fathers with dependent children are more uninsured than single mothers. It also suggests that the level of under-insurance for single parents is not radically affected by level of income.

So why is this? Is it because single parents don’t worry about the financial consequences of dying?  Umm, probably not.

Maybe it has something to do with single parents being very pushed for time and simply not getting around to it, or maybe a single income family is more likely to be financially stretched.

Thankfully ‘online’ life insurance has changed all this. Buying online takes as little as 10 minutes and you’ll typically pay around 20% less!

So… if you’re

• a working single parent
• without life insurance
• and your children are financially dependent on you

just click here!

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.

Unbelievable.

This story surfaced in the NZ Herald on the weekend about the owner of an Auckland-based  finance company (Guaranteed Finance Limited) and a crooked funeral insurance scheme in which the owner targeted poor communities.

Seems the finance company’s owner, Andrea Baker (if that’s her real name… since she appears to have used many names) thought she was onto a winner – not unlike Lotto, only with far better odds!

We understand Andrea’s rip-off scheme worked like this…

• First you target a person in the 50+ community (prefer someone who seems unhealthy) with an offer of free funeral insurance to the value $20,000.
• Visit them and go through all their personal and medical details on an insurance application form
• Lie on the application form about their smoker status (if you have to) to reduce the insurance premiums
• Submit the application form (which is really for $500,000 of life insurance) to the insurance company, nominating Guaranteed Finance (read Andrea Baker) as the beneficiary if the insured person dies
• The insurance company pays Andrea a sales commission for concluding the sale… for example, Sovereign will typically pay a commission big enough to cover the monthly premiums for at least the first two years (go figure!)
• Andrea then uses these commissions to fund the monthly premiums, whilst hoping like hell that the poor soul dies before the commission runs out.
• If the insured person dies within the two-year period, then Andrea wins big. She collects $500,000 from the insurance company and maybe (although unlikely) gives the family $20,000 for funeral expenses.

We understand from the story (as reported) that Andrea had signed up more than 350 of these policies.  With so many policies active, eventually one or two of these policies would pay out and bingo… Andrea would be an instant millionaire!!

Clever Andrea!

And silly us… for not believing people are capable of stooping so low.

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…

PINNACLE LIFE today claimed another first in NZ… Cancer Cover… now available as a fully underwritten product instantly online.

Cancer Cover, as explained in this Stuff article, is a straightforward insurance policy that pays a cash lump sum if the insured person is diagnosed with cancer… simple as that!

With the purchase of a Cancer Cover policy, Pinnacle Life will donate the first three monthly payments to either the NZ Breast Cancer Foundation or the Prostate Cancer Foundation of NZ (depending on the gender of the person covered by the policy).

Cover up to $250,000 can be purchased immediately online, without a medical.

The policy is applied for and issued online in the same way that existing Life, Mortgage and Funeral products are offered on the PINNACLE LIFE website. The buying process from application to policy issue is fully automated using advanced electronic underwriting software developed by Intelligent Life Limited.  The on-line underwriting is supported by reinsurance giant Hannover Life Re of Australasia.

The entire application process takes less than 10 minutes after which applicants can see a draft version of their personalised policy document before committing themselves.  On payment, consumers are emailed their policy document instantly.

Whilst Cancer Cover is designed essentially for the under-45 consumer, it is available online to anyone aged 20 to 59.

Buying Cancer Cover is now as straightforward as buying an airline ticket… maybe even easier!

Today’s ‘instant serious illness cover’ follows the launch of instant Life Cover, instant Mortgage Cover and instant Funeral Cover by PINNACLE LIFE over the past 18 months.

See also Stuff article here.

We copped some flack this week for standing up for policyholders whose premiums are about to be increased by some life insurance companies. The flack from some professionals in the industry was a little unfair, we thought, with some comments bordering on what we would regard as ‘myths’. I’d like to bust a few of them…

Myth 1

Pinnacle Life sources it’s new business by somehow ‘piggy-backing’ off the hard work of other insurers…

Busted! Pinnacle Life spends significantly on radio/TV advertising and employs its own underwriters and administration staff… fair to say that Pinnacle Life pays its own way for its new business.

Myth 2

Consumers that buy insurance from Pinnacle Life don’t understand what they’re buying…

Busted! It’s patronising to suggest consumers are illiterate and can’t understand a straightforward policy document, particularly when Pinnacle Life won the NZ WriteMark plain English Award in 2009 for its clear and understandable policy wording. We think consumers are smarter than that.

Myth 3

An adviser that switches a policy to Pinnacle Life to achieve a 20% saving for a client, while earning a 75% commission is “shameless”…

Busted!  If that adviser is shameless, what do you call an adviser that switches a policy to achieve a 5% saving for a client and then pockets a 220% commission?

Myth 4

Pinnacle Life’s only point of difference is price…

Busted! Besides offering the most competitive prices in NZ, life insurance policies from Pinnacle Life are jargon-free, straightforward and relevant… and can be purchased online in less than 10 minutes…

There’s a lot going on in the life insurance industry around price increases, brought on by a change in tax legislation. Pinnacle Life made several comments (see Good Returns and Stuff) about insurers unjustifiably raising premiums for their existing policyholders and we’ll stand by that.

The nub of the issue is that we have new tax legislation in NZ specifically for life insurance companies, as mentioned in a previous post. The new legislation effectively increases company tax on life insurance policies sold after 1 July 2010.

But what about policyholders that already have a life insurance policy today? Is there an increase in company tax for these policies?

The simple answer is “no”.  The new tax legislation protects existing policyholders by effectively waiving increased tax on these policies for a period of 5 years. For what it’s worth, the concept has been termed ‘grandfathering’.

So why are some insurers increasing premiums for their existing life insurance customers? After all, there’s no added cost related to these policies so we’ve questioned the logic.

And who’s standing up for these existing customers?

We also wonder what the IRD will make of all this given their extraordinary effort to avoid this happening.