Recently I was undertaking some research in support of my belief that every family in New Zealand needs to consider medical Insurance as a cornerstone of their risk management plan.
The data I obtained from AIA Insurance validated my belief.
• People over 65 comprise 12% of the population but consume 40% of health spending.
• By 2051 the proportion of the population over 65 is estimated to double with the share of the total health spending increasing to 63%.
In my opinion, Government health spending will increasingly need to be “rationed” in the future. The focus will be increasingly on acute services and those most in need. Threshold levels for elective surgery will inevitably increase.
Elective surgery and diagnostic services not identified as an emergency and not life threatening will be prioritised within the Public Health System; notwithstanding the fact that it can improve a person’s health and quality of life.
In many situations diagnostic procedures are essential before a decision can be made to proceed with surgery, and there can often be delays in obtaining these diagnostic services through the public hospital services.
Elective services include hip and knee replacement, heart surgery, hysterectomy, cataract removal, cancerous tumor removal and diagnostic services such as endoscopy, laparoscopy, colonoscopy and MRI scans. While these services will continue to be provided by the public health system, they are increasingly becoming the domain of the private medical health industry.
The topic of conversation in many of the media outlets this week has been the on lack of trust that the New Zealand consumer has in the insurance industry. As much as I hate to admit it, it is a well-founded observation.
The commentators in TV, radio, newspapers and social media have avoided the single most important word that describes the purpose and objective for owning insurance; that is to create ‘CERTAINTY’.
Consumers purchase insurance to have the “peace of mind” provided by the financial CERTAINTY that, in the event of suffering a mishap covered by the insurance policy, that the claim will be paid, without question, to the full extent of the contract promise.
CERTAINTY is the missing ingredient. Plain language policies, when they were introduced in the late 1990’s, were intended to create CERTAINTY for the layperson. That is until we had a major disaster in Christchurch. The plain language policy words like “replacement value”, “as when new” or “as new” unbelievably had to have their meaning determined by the courts.
Common sense and integrity were replaced by “legal speak”.
The behaviour and delays in settling the Christchurch earthquake claims warrants urgent regulation of the claims process for general insurers.
With the latest life insurance and financial advice sector reviews, the consumer is again being ignored by the regulators’ approach to managing/regulating the integrity of the insurance industry by not addressing the claims management process.
I am embarrassed as a 40 year sales veteran to observe the industry review focusing further on regulating the sales of insurance; however, there appears to be no focus, rules or regulations offering any CERTAINTY to the insuring consumer with respect to claims management behavior of the insurance companies themselves.
Unwittingly I suspect, these same regulators are allowing the insurers to dictate their positions by being allowed to continue to market and issue policies to consumers that can be underwritten at claim time. Many policy owners are unaware that within the small print of many policies, before a claim is acknowledged and/or paid, the insurer then has the right to “check up” on your medical records, inspect your house or motor vehicle, and may require evidence of the property ownership documents.
The practice of underwriting at claims time is undertaken on almost all classes of policies including medical, life, trauma, disability, income replacement, travel, motor vehicles, and house and contents.
If, at application time, an inspection was made of the commercial building, house, contents or car, there would be no issue about modification, gradual deterioration, or pre-existing conditions; therefore this “fine print” could then be banned from the policy and the insurer would be required to improve their behavior immediately.
In the life, travel and medical areas, if medical records are requested before the policy is issued there is no opportunity for the insurer not to be fully informed of the risk and this information would eliminate almost all non disclosure issues.
Within the current environment there is no CERTAINTY for consumers while this behavior is allowed to run rampant.
During a TV3 Interview on Monday 23 June 2019 Tim Grafton, the spokesperson for the insurance industry, said that 90% of all claims are paid without question. That means that 10% of claims are investigated or at risk of not being paid. 10% is unacceptable and could be completely eliminated if regulations were put in place to ensure that all applications were underwritten correctly before the policy is issued.
Our firm recently made submissions to Government arguing for the need to explore how the insurance industry needs to modify the management of underwriting and claims. We hope our submissions do not fall on deaf ears. It is the claims management process that is in question, but all the emphasis is on the sale rather than the purpose for which the policy was purchased; financial CERTAINTY.
As part of the last phase in our earthquake claims auditing work we prepared and submitted to the Ministry of Business, Innovation and Employment (MBIE) our report on our reflections of our experiences and concerns relating to the insurance industry’s performance in the management of earthquake claims. We also made recommendations for changes to the claims management process.
Our objectives in preparing the report were:
To develop effective regulations modifying the behaviour of EQC and the insurance industry to ensure consumer interests are secured.
To restore the confidence of the insuring public in the industry.
To make the industry accountable to a government agency with the necessary authority to discipline individual companies for delinquent behaviour as a result of not applying good faith to their activities.
MBIE requested our permission for our report to be provided to the Public Inquiry into the Earthquake Commission. Subsequently the directors of KSL Audit met with Dame Silvia Cartwright and her legal counsel to discuss our report and our recommendations for upgrading and improving the claims management process for future events.
Dame Sylvia gave us a very fair and extensive hearing and we felt it appropriate that all our clients now received a copy of the report.
We also attach an extract from the MBIE Options Paper – Conduct of Financial Institutions, Section 101 which summarises information from our document.
We trust that we have represented your concerns accurately within this document.
Living insurance, known as “critical illness”, “trauma” or “major medical”, is the policy that pays a lump sum if you are diagnosed and survive 14 days from an extensive list of over 48 medical conditions. It also pays a lesser sum, generally 20% or up to $100,000, on a secondary list of early stage conditions/ events. This money will enable you to fund care, rent/mortgage and all outgoings and will also allow you to retire any immediate pressing debt, fund unforeseen medical costs and it will allow you to focus on recovery without financial stress.
Once you are paid a full claim the policy ceases. Some policies offer a reinstatement of the contract after 13 months but do not ever cover again the condition that caused the original claim.
Introducing Asteron’s new ‘Continuous Trauma‘ benefit
Asteron has just released what I view as one of the most valuable upgrades to living insurance policies in the form of ‘Continuous Trauma’ benefit.
‘Continuous trauma’ benefit means the policy is not cancelled and continues to protect you for all other conditions. After three years the condition that caused the claim is also reinstated and this process can continue for two further claims during the course of the contract.
Let me give you a real life example of the value of ‘Continuous Trauma’
I am living proof of the value of this new upgrade benefit.
As many of my clients know, I had a heart attack in 2015 and three months later was diagnosed with unrelated cancer of the bladder. Had this contract extension been around then, I would have been paid out twice! (I am pleased to advise I am totally clear on both counts now.)
I am recommending to all my clients to add a ‘Continuous Trauma‘ benefit to their existing trauma policy.
In this newsletter I want to share with you a story that has forever affected the life of a valued KSL staff member. I have this person’s permission to share her journey with you; the bad, and also the good of her ordeal.
This tragic event could happen to anyone and is a reminder to all millennials and their parents who may be skeptical of the value and need for including insurance as part of their risk management programme.
For many years I have been strongly advocating that my business owner clients should consider the financial impacts of illness and/or disablement to key employees. My advice has always been that clients protect themselves and their staff with appropriate insurance on their key people.
My Journey to and from the Earthquake Claims Business
In September 2017 I decided to “wind down” my involvement in auditing and negotiating earthquake claims. If I am honest with myself, I just got sick and tired of what I regard as the unethical behavour of the insurance companies in managing earthquake claims.
In 2011 when I initially set up the claims audit business it was to help my own KSL clients. I expected that we would be all “done and dusted” within 12 to 18 months. The reality was, it ended up consuming me! The business diversified into a specialist claims audit business which I operated for almost six years.
With the successful integration of the new shareholders from the Maurice Trapp Group into KSL Insurance I am delighted to now be embarking on the continuation of my first love – Life Insurance Auditing. Helping clients (before they have their claims) through my Pre-Claims Audit.
What the earthquake sequence has taught me as an insurance veteran of 48 years, is that the principles of good faith and Insurance integrity vanish when a disaster strikes at the heart of the profitability of an insurance company.
….2018 was my 48th year in the insurance industry. Other milestones included:
I turned 65 in May 2018.
I achieved a 3 year clearance from my bladder cancer concerns – I am now out to a six-month surveillance program only.
In September 2017 I closed the claims audit business to new claims. Through 2018 we have “run off” the majority of the outstanding claims.
Concurrently I have refocussed the business on its core activity “Life Insurance Auditing”.
I finalised my business succession plan.
New Ownership Structure
At the start of 2018, I finally conceded that I was no longer immortal and that I had an obligation to my loyal and valued clients to develop a long term continuation strategy. I commenced in earnest the development of a business succession plan.
I explored several options, from employing a successor, bringing in a younger partner, through to an outright sale. My personal desire was to retain an active involvement within the industry and preferably within the KSL business so that I was able to continue to service my existing clients as I do not intend to retire.
There is much to do in Christchurch, but there is also much to do to ready ourselves properly, effectively and efficiently now, to ensure that the problems of Christchurch never again be the problems that any other New Zealanders needlessly has to endure.
The changes suggested need political intervention and a will from politicians to “do the right thing” for ordinary New Zealanders. Ask Your local Politician what they intend to do to fix this problem. – Kevin Seque