Some Topics to Think About for 2020 - KSL Audit, Christchurch, New Zealand

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.

Our Audits are on a no cost and no obligation basis. It is part of our obligation to our clients ensuring that they are aware of the consequences of any changes in their objectives, personal circumstances, and risk profile and what mitigating steps they can take.

Consequently, this leads onto the next topic we need to discuss…..

The importance of regular reviews…… it’s a two-way street

You need to keep in touch with us to ensure that your changing circumstances are integrated into your insurance program. Insurance portfolios can very quickly become out of date and you may find that they are no longer appropriate, or the covers are inadequate to meet the ever changing challenges.

An insurance audit review should be undertaken if any of the following events occur in your life.

Mortgage / Increase / Decrease
Marriage / Divorce / Separation
Children: Birth / Private schools / Tertiary education
Children leaving home, downsizing of housing requirements
Change of smoking status
Sickness / Accident / Disability
Redundancy / Change of occupation / Promotion
Recreational activities
New business venture / Selling business
Retirement.

All of these events could impact on you at some point in your life and each will necessitate you considering how they could influence the relevance of your existing insurance program.

All of our clients are allocated an annual review month during which we will contact you asking you to update us in respect to changes in yours and your family’s circumstances. Based on this information we will identify if any changes are required and notify you accordingly.

Making premiums affordable – options

An issue that needs to be addressed by most clients, and especially those over the age of 40, is the need to review the funding of their existing insurance program. Typically insurance policies are taken out at the earlier life stages using yearly stepped premiums when budget issues are a significant factor in the decision making.

As you get older your yearly stepped premiums increase exponentially, as does your risk of getting sick, suffering a critical illness, or becoming disabled or dying. Your income however generally does not increase at the same rate.

Within our Audit we address the shorter and the longer term insurance needs and match the policies with the appropriate funding solutions.

Level Premium and Premium Freeze have increasingly become useful product enhancements as you age. As you move into your 50’s and 60’s the levels of cover should be diminishing as your mortgages reduce and children are no longer dependent on you. At this stage your focus will shift to wellbeing, retirement accumulation and succession issues. The major consideration for most people from age 50 onwards is to ensure that you have adequate capital sum Trauma / Critical Illness insurance with a premium structure that means these policies are affordable as you move into the later stages of your life, when the claims for critical illness are most likely to occur.

The increasing cost of private medical services is also becoming a major issue and is being reflected in the current significant increases in medical insurance premiums. Being able to continue to access the critical aspects of private medical insurance is important and restructuring rather than cancelling policies needs to be considered as a strategy.

Managing claims

There are significant advantages in having KSL Insurance to help manage any claims. We ask that clients contact us as soon as a possible when a potential claims event occurs so that we can help you develop the ‘proof of loss’ evidence before lodging the claim with your insurer. It is worth noting that it is the claimants responsibility to produce the medical evidence to justify/support the claim.

There is no cost or fees for our service in respect to claims management.

Here are two examples from our case studies to show why you should ask for our help:

A client did not realise that they were covered for the diagnosed particular early stage cancer. They only thought that it was for specific events (testicular, prostate, melanoma and lymphoma) and did not realise the Asteron policy they owned covered ANY early stage cancer whereas the other industry policies only cover nominated areas. KSL Insurance lodged and negotiated a claim and the client was paid $36,000.
A long time client suffered a mild stroke and never advised KSL Insurance. During a recent Audit the client advised us of the condition which occurred nine months earlier. KSL lodged a claim with Asteron who waived late notification. After obtaining all the necessary medical evidence, the claim was admitted and the client received $69,000.

When’s the best time to take out a personal insurance policy?

Insurance is a lifetime purchase. The person you are today is probably the healthiest you will ever be for the rest of your life. When you apply for Insurance you may never be able to get cover at these terms and conditions again. So ensure you have the best possible cover with a company that is financially stable and going to be around in 40 or 50 years to be able to meet your claim.

Finally…..

Kevin, Brian, Sharon and Jack, together with our colleagues in the Maurice Trapp Group, thank you for the trust you place in us to be part of your risk management team. Enjoy Christmas, the New Year festivities, and we will be in touch during 2020.

With our best wishes

Kevin, Brian, Sharon and Jack

(1) Financial Services Council. Moments of Truth: Key Insights into the New Zealand Life Insurance Industry. 2019.