Managing your insurance portfolio
Effectively developing and managing our personal insurance portfolio is a critical part of assuring that our family’s financial security and lifestyle is not put at risk. Just as we are encouraged to develop long term savings strategies for our retirement by establishing a portfolio of assets, we also need risk management strategies to protect our income that is used to generate our savings, and to ensure adverse health and accident events do not prevent us from being able to retain our asset portfolio.
For many people understanding the issues, analysis and jargon of personal insurance is daunting and often results in ‘whatever you think is best for me’ solutions. Consequently, deciding who you are going to work with in developing your personal insurance portfolio is one of the more important decisions you make in planning your life’s journey; it is much like deciding on who your solicitor, accountant or doctor will be.
A recent survey(1) undertaken by the Financial Services Council identified that ‘peace of mind’ is paramount to people when taking out a personal insurance policy. This peace of mind stems from the relationship between the person selling and the person buying; in very simple terms, it is ‘trust’. And as one respondent from the above survey commented: “Also, with peace of mind you feel more in control. You are able to carry on.”
Choosing your adviser
So let’s take you on a journey where you can explore what you need to know in choosing an adviser to help you develop and manage your personal insurance portfolio.The first thing you need to accept is ‘this is going to be an important relationship that, if successful, will last your lifetime and beyond.’ Hence the initial focus has to be on trusting your adviser. This comes from many perspectives but there are five things about advisers that are particularly important; being able to listen, being able to understand your point of view, having the background and experience, being with you for the long haul, and doing what they say they are going to do.
In the insurance industry there are many differing labels used to describe marketing and sales people including insurance agents, advisers, and brokers. Some are employees and some are independent contractors. Some have an almost tied relationship with one insurance company, while others use a wider range. Some are on a salary, some are on retainers, some are on commission on new sales, and some are on a combination of commission on new sales and servicing fees from existing clients.
For the typical family the insurance adviser must commit to a long term relationship. In doing so there needs to be a process in place whereby regular (annual) reviews are undertaken to ensure your insurance portfolio is appropriate for your family’s evolving circumstances.
At KSL Insurance Limited we recognise that we are in the people industry. We help families weather the storms they face and underpin their future success. While we are small in terms of the number of people in Christchurch, we are large in terms of our experience (Kevin 49 years, Brian 23 years) and resources we can call on to help.
Now having the Maurice Trapp Group as one of our major shareholders means that we have access to a broad range of additional skills and resources, as well as providing continuity in terms of succession.
Kevin’s philosophy of the Insurance Audit
To quote the mentor who introduced me to the concept of the insurance audit:
“Insurance is sold by commission sales people with the object of making a sale; and most people who are sold insurance do not fully understand what the policy covers them for. It is only at claim time, when it is too late to rearrange the contract, that they find out how good or bad the policy and the advice actually is” (Noel Hough)
Insurance Auditing is an art involving a synthesis of a client’s objectives, their risk profile, their risk tolerance, and their existing insurance program. Experience is critical. Being able to consider a whole family view means multiple generations and a planning horizon that could be more than 40 years.
The outcome of the Audit must ensure that the client understands
- what their existing insurance policies protect them for,
- the outcome at claim time, and
- whether the insurance policies they own are appropriate to meet their stated short and longer term objectives in the event of a claim.