Compare advised and non-advised Life Products in New Zealand

Presented by Alan Rafe, CEO of Quality Product Research, at the IFA-PAA Continuing Professional Development Roadshow

September 2016

Learning objectives

• Understand the differences between the main direct and advised life products

• Understand the different expected future premiums for these groups of products

• Understand the main feature differences

• Understand the premium / convenience / feature trade-offs available to clients

• Understand the value of these different offers to client groups

Life Product Review

Bank Direct Advised

ANZ AA Life AIA

BNZ Cigna AMP (RPP)

Co-op SX Asteron Life

KiwiBank Pinnacle Fidelity Life

Westpac OnePath

ASB Partners Life

Sovereign

Data Set

0

5

10

15

20

25

20 25 30 35 40 45 50 55

% D

iffe

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Age

Monthly Premium Rates Male Non-Smoker $200,000 Life InsuranceNon Advised vs Advised Percentage Difference

0

10

20

30

40

50

60

70

80

90

100

20 25 30 35 40 45 50 55

$ M

on

thy

Pre

miu

m

Age

Monthly Premium Rates Male Non-Smoker $200,000 Life InsuranceDirect

AA Life

Cigna

Southern Cross

Pinnacle

-3

-2

-1

0

1

2

3

4

5

6

7

20 25 30 35 40 45 50 55

% D

iffe

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ce

Age

Monthly Premium Rates Male Non-Smoker $200,000 Life InsuranceAdvised vs Banks Percentage Difference

Quality Rating

Provided by: Quality Product Research Limited

Head to Head

(insert head to head between Asteron and Co-op)

- Life Cover Product Review- Funeral Product Review

Non-underwritten life product review

Non-underwritten Life Products

Product

• Provide cover with no underwriting questions from ages 16 To 64

• Has a number of exclusions based on pre-existing cover, occupation and hazardous pursuits

• Three main providers • BNZ

• Sovereign (for ASB and State Insurance)

• Greenwich Life

Comparison of ProductsCompany Entry Age Sum Insured Additional Exclusions –Pre

Existing ConditionsHazardous Activities Coverage

BNZ 16 to 64 $100,000 • 3 years• If you have ever had a

loading or been declined not eligible

Yes

ASB 16 and 55 $500,000 5 years and for any pre-existing condition for which you are taking medication for

No

Greenwich 21 to 60 $50,000-$200,000

• 3 years Yes

Placement - Distribution

• Direct from Web sites or over the phone.

• Sovereign has distribution agreements with State Insurance and ASB

• ASB actually offer a fully underwritten product (my Life) which is cheaper than the public version but only when login into your account.

• BNZ offers over the phone and both product types online.

• Greenwich offers web site and via direct mail and telemarketing

Price

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$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

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Age

BNZ Options Avg 46% more expensive

BNZ Easy Life

BNZ Comprehensive

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$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

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$1

00

,00

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Age

Sovereign Options Avg 68% more expensive

Sovereign Simple Life

Sovereign TotalCare Max

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

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ce $

10

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Age

Price Comparison Non-Underwritten

BNZ Easy Life

Sovereign Simple Life

Greenwich Life Quick Cover

Future PremiumsMale $100,000 Non Smoker Age 30

BNZ ASB

30 year Old Easy Life Underwritten Difference Simple Life Underwritten Difference

3 Years $ 761.28 $ 505.08 $ 256.20 $ 800.52 $ 502.56 $ 297.96

5 Years $ 1,261.92 $ 853.80 $ 408.12 $1,322.64 $ 832.08 $ 490.56

10 years $ 2,574.24 $ 1,821.00 $ 753.24 $2,746.68 $ 1,713.72 $ 1,032.96

20 Years $ 6,714.35 $ 4,752.84 $ 1,961.51 $7,397.28 $ 4,359.72 $ 3,037.56

Promotion

ASB

BNZ

State Insurance

Example of a direct insurance declaration is at right

Note the reference to the exclusions brochure

Note the customer acceptance of a no advice sale

Issues• It would be difficult for people to understand what they are actually

covered for.

• Spending a bit more time at the beginning of the process to ensure at claim time you do not have an issue

• Easier for the provider to make sales utilising this type of product as the sales people can spend less time on the phone asking in-depth questions and a 100% issue rate (compared to 50%-60%)

• Could have an impact of the public perception of life insurance if companies do not pay claims

• Underinsurance in NZ is an issue and the more we can do to increase this the better

• Opportunities to upsell cover at a later date

Exercise• Three advantages of buying direct

• Three advantages of buying from an adviser

• Three reasons a why a client would buy a non-underwritten product

Provider Product Min. Age Max. Age Min. Sum Insured

Max. Sum Insured

AA Life Funeral cover 50 79 $3,000 $30,000

AMI Insurance Funeral Plus Policy 50 75 $3,000 $15,000

Cigna Funeral Plan 55 85 $5,000 $15,000

Dorchester Life Funeral Plan 50 79 $5,000 $15,000

Fidelity Life Funeral Fund 16 64 $2,000 $12,000

Greenwich Life Funeral Plan 30 70 $5,000 $20,000

Legacy Life Funeral Plan 50 79 $4,000 $15,000

Partners Life Funeral Plan 55 85 $5,000 $20,000

Pinnacle Life Funeral Cover 30 75 $2,000 $25,000

Southsure Funeral Cover 55 85 $5,000 $15,000

State Insurance Value Plus Funeral 50 75 $3,000 $15,000

Research Ratings – Funeral Plans

AA Life AMI Cigna Dorchester Life

Fidelity Life

GreenwichLife

Legacy Life

Partners Life

Pinnacle Life

Southsure

State

Percentage of Highest

88.8% 94.9% 91.0% 87.4% 96.3% 100.0% 92.5% 96.2% 98.5% 90.7% 95.2%

Comparison to Underwritten Life Insurance

• Average cost for to age 80 level cover

• Based on estimated cost for same sum insured (min premium issues)

• Average cost of life is based on five insurers

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

Rat

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Age

Life Cover vs Funeral Cover Average $30 per month more expensive for Funeral

Avg Funeral

Avg Life

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

Rat

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10

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Age

Life Cover vs Funeral Cover Average with 100% loading

Avg Funeral

Avg Life

100% Loading

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

Cover Comparison

Funeral Cover Level to age 80

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$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

Rat

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10

,00

0

Age

Life Cover vs Funeral Cover Avg $30 per month more expensive

Avg Funeral

Avg Life

Level age 35

Reasons to take Funeral Cover• Older (above 80)

• People that have a pre-existing

• People that do not like answering health questions

• Quick and simple

• We are living longer

Thank You

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