Archive for Buying on-line

How much life insurance do I really need?

Posted by Steven

How much life insurance do you really need? It takes a few steps to calculate, but it’s not rocket science. The only thing that really matters when it comes to determining how much life insurance you need, is how much income do your dependents need if you aren’t around? To answer this you have to first answer these two questions;

  1. how much do you spend each month? (Use your bank statements to calculate your monthly average spending) and
  2. do you have any realisable investments or assets other than that marked for retirement or future know expenses like kids education?

A working example to calculate your insurance needs…. Let’s say you know you spend $6,000 each month to pay all your bills including your debt repayments. Of the $6,000, you earn $3,500 and your partner earns $2,500. Your monthly income is equivalent to $42,000 a year ($3,500 x 12). You need enough protection insurance so that if you pass away, you could invest the proceeds and earn $42,000 after tax. How do you calculate that? If you assume you could earn 5% on the money, simply divide $42,000 by 5% and you have your answer. In this example, the number is $840,000 (42,000 / 0.05). That’s how much savings you need to invest at 5% to earn $42,000. The $840,000 is what your survivors need to get through until they don’t need your income. You can offset it with other insurance you already carry or if you have savings or realizable assets that isn’t earmarked for retirement or other purposes. This isn’t a scientific approach – it’s a ballpark calculation. But it’s pretty close to what you need, and it’s a calculation you can do yourself. It’s also a heck of a lot better than a wild guess.

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Hello TradeMe – welcome to the world of life insurance

Posted by Steven

With much fanfare TradeMe have launched into the world of Life and Health Insurance distribution. Naturally, there has been chatter in the industry; Why TradeMe?  What will this do to the industry?

The aggregation business model is strong in other countries, iSelect in Australia, SuperMoneyMarket in the UK and Geico in the US all lead the way in this space. There is no NZ equivalent with the range of products and services these companies offer, but one would have to think Life Direct would be the best contender given its standing in the life and health space. From the side-line, one would think the Life Direct model had ample opportunity to flourish as an independent distributor. So, what has TradeMe got to gain by purchasing Life Direct?

Phil Macalister in GoodReturns questioned TradeMe boss Jon Macdonald, including asking why not implement a Pinnacle Life online model, in which the consumer can actually ‘buy’ on-line.  Would Pinnacle Life not have been a better fit for TradeMe consumers?

Unfortunately, Macdonald did not reveal much, other than to suggest the obvious strategy of growing market share by levering their vast website traffic to promote the offering, but making no comment on anticipated sales increase. Pinnacle Life in his view was not the right fit, TradeMe is not looking to purchase a manufacturer of life insurance products.

Pinnacle Life view TradeMe’s acquisition of Life Direct as positive for the industry. Yes, Life Direct will be a competitor, but they always have been. We can’t see what will change, other than Life Direct not needing to advertise as much – because they get a free ride on the back of TradeMe traffic and accessing TradeMe’s database. However, it may require renegotiating the commission they receive from the insurance companies that they represent, to feed the TradeMe distribution machine.

The good news for the industry is that TradeMe has elevated the category of ‘Life Insurance’ in the market for the entire industry and we believe Pinnacle Life will be a beneficiary. If it’s ok to source life insurance through TradeMe, then buying life insurance online direct from Pinnacle Life or a Cigna becomes an easier and maybe preferable option. Introducing a Life Insurance as a category on the TradeMe website tells consumer that ‘maybe you don’t need a broker after all to buy life insurance’.

The risk insurance market in NZ is worth about $1billion each year. Direct companies currently occupy only about 6% to 8% of the market. The banks enjoy approximately 28% of this market and the balance is served by independent financial advisers.

It’s difficult to fathom that TradeMe is targeting the ‘direct’ market segment given its relatively small size. And since the banks have a clear segment of their own, this leaves the segment traditionally served by financial advisers.

So, the question is probably not about how TradeMe will impact Pinnacle Life or other direct-to-market insurers; it is more about how TradeMe will impact the independent financial advisers.

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One joint life policy is not always better than two individual policies

Posted by Steven

You may automatically assume that buying a joint life insurance may be cheaper and better than buying two single life policies, BUT this is not necessarily the case.

For starters, generally taking out two separate life policies may be marginally more expensive, but you will get twice the pay-out if you both die during the insured term. With a joint single life policy there would only be a single pay-out.

Also, if you take out a joint life first death policy (often used for covering mortgages), the policy would pay-out then cease in the event of either of you dying during the term. This will leave the surviving partner having to take out a new life policy, which is often a lot harder and more expensive give the increased age of the surviving partner.

Finally, having each life separately underwritten and insured on its own merits, makes each party independent of the other. Hence the policy is not dependent on the survival of the marriage or partnership. With individual policies, all the potential arguments (like changing ownership or cancelling a joint policy) disappear.

So don’t just assume a first death joint policy is best for you.

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Can marriage insurance protect a marriage?

Posted by Steven

On a recent visit to Beijing, China’s Sunshine Insurance Group showed me just how innovative they are in developing new products. Chinese life insurance industry may not yet be online, but in terms of product offerings, they claim to be the most innovative yet when it comes to insuring risk. To prove his point he described their recently introduced a new marriage insurance called “love you forever ” aimed at protecting the rights of wives in divorce.

According to the company, the insurer must be the husband and the wife will receive 60, 80 or 100% of the interest in the policy on divorce or on reaching its expiry term, whichever should come first. Fifty years after being insured, the wife will receive a payoff from the company to celebrate the golden wedding.

Using NZ currency equivalents, if the husband buys a $100,000 policy, on the 50th anniversary, his wife will get $800,000 from the account if she had a 100% interest in the policy. In the event of a divorce, the pay-out is substantially reduced. The incentive to maximise the pay-out is to stay married for the full term of the policy.

Sunshine Insurance Group said that women are still a vulnerable group in society as well as in marriage, so this was a way of protecting women’s rights. Some believe the idea is meant to reduce the chance of a husband having an extramarital affair.

However, other Insurance companies have expressed concerns about marriage insurance, pointing out that some couples might choose to divorce in order to qualify for a pay-out, and then re-marry, as there was nothing in the insurance contract preventing such abuse. Others criticise the stipulation that the wife benefits because sometimes wives are equally responsible for divorces.

Marriage insurance… innovation or just another attempt by Insurance Companies to incentivise its policy holders to retain their investment linked insurance policies?

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New Bird Flu, are you at Risk?

Posted by Steven

A new strain of bird flu has broken out in China H7N9. Is the new bird flu strain likely to reach New Zealand or is this just another health scare? The Chinese H7N9 outbreak started just a few weeks ago, and so far authorities have reported upwards of 82 individuals infected with this strain of flu, with most of the cases originating in the Shanghai area. The most recent outbreak is the first time that the particular H7N9 strain has been seen in humans, joining a number of other flu variants that have crossed the species boundary, as you can see in this infographic.

Information is Beautiful on influenza

Diagram showing bird flu mutation

So far, no concrete evidence of human-to-human transmission of H7N9 has been found. That said, there are a few other options – as seen in the infographic, this particular flu can infect pigs, and may have also mutated to infect other animals with which humans might have contact. Alternatively, the virus may be able to survive outside the bodies of birds, which could result in contraction of the strain even without physically touching or being close to a bird.

If H7N9 turns out to be transmissible by human-to-human contact, there is the risk, as with any new flu strain, that it could turn into a pandemic. As of yet, H7N9 infections have stayed within China, – however, this could change at any time, so vigilance and flu-prevention techniques are always good practice.


For those traveling to China, avoiding poultry markets or any other areas where you might come into contact with birds is extremely wise, as are frequent hand washing and covering the face when coughing or sneezing.


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What’s the difference between buying Funeral Insurance or a Pre-paid Funeral Plan?

Posted by Steven

Funeral insurance or “final expenses” insurance is a life insurance policy with a small cover amount, such as $5,000 to $25,000, that you may buy directly from and Insurer like Pinnacle Life. You can name any beneficiary, typically a family member, who would make the claim and receive the money upon your death. That beneficiary would then be responsible for using the money to carry out your wishes.

The beneficiary legally could decide to use the money any way they want, so make sure you trust your beneficiary. Also, if your cover amount exceeds the cost of your funeral, the beneficiary keeps the difference.

Another type of life funeral insurance is called pre-paid insurance. It is intended for the person who has selected specific arrangements at a funeral home and wants the assurance that those arrangements will be paid for and implemented.

Unlike funeral insurance policies, which you buy directly from an insurance company, pre-paid policies are sold by funeral home directors. The funeral home is the beneficiary of the policy and the funeral director receives a commission, for selling you the policy. The Funeral Directors Association of NZ website has some good information about pre-paid funeral plans.

Unfortunately, unlike funeral insurance, there are no websites which allows one to comparison shop for pre-paid funerals, so you’ll have to phone around to compare prices and policy terms.

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Who actually reads the ‘small print’ on websites…?

Posted by Steven


Websites are now plentiful offering ‘calculators’ that enable you to work out the amount of life insurance cover you need.

But look more closely on some websites and you may find a ‘disclaimer’ saying your calculation and the information they’re providing may not be reliable… Why provide and promote tools that can’t be relied upon to meet your needs?

Typical disclaimers (from a NZ website)…“At Your Own Risk Any transaction you enter into with an Insurance Provider etc, etc… is conducted and completed entirely at your own risk. Neither [website name] nor the Insurance Providers give any advice or make recommendations as to the suitability of cover. [Website name] does not make any representations nor give any warranties in relation to any products or services promoted or sold by the Insurance Providers including: a. Content, description, worthiness, suitability for any particular purpose, quality or legality of the products and services that are promoted and offered by the Insurance Providers on the Website; b. Whether any insurance or service offered by the Insurance Providers on the Website will meet your requirements or expectations.

Can you imagine buying a new HP calculator with a disclaimer that said “hey, this is a great calculator but don’t rely on the answers you calculate”. Or what about an aircraft instruction manual saying “we’re not responsible if you follow our instructions’… or a disclaimer on a restaurant menu saying …”we’re not responsible if you get served something entirely different from what you ordered…” Nice to see a website that’s willing to stand 100% behind the information, tools and services it provides! :)

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Premiums to match your DNA?

Posted by Steven

An insurance joker once professed, “Insurance employees don’t need titles on their business cards; white shirts actuarial, blue shirts marketing, black shirts underwriting”. Underwriters are viewed as the morgue of an insurance company, “the policy prevention department” as my business partner once put it. Assessing individual mortality is part science and part luck. But the advances made in genome sequence are going tip the scales greatly towards the world of science.

The X Prize Foundation is offering US$10M to the first team to sequence the genomes of 100 centenarians.  In layman’s terms “find the genetic code for those that live beyond 100 years”.  The competition starts Jan 2013, and the sequencing has to take place in 30 days.  The competition aim is two-fold. First, find a way in which genomes can be sequenced accurately in a relative short period of time, second, determine what genetic pool is consistent with longevity. No easy task apparently (read the article in the economist for more info).

Back to the black shirt underwriters. The ability to sequence genomes quickly will make the cost of getting a report on an individual’s DNA make-up much more affordable. A hair sample will give an underwriter an accurate description of the likelihood of all or any serious alignments that may linger, and a much better view of longevity. No more blood or urine tests; simply send a hair sample and with-in minutes the underwriter will have a health assessment waiting on their PC with the aid of some ingenious piece of software. The push to economise genome sequencing is going to revolutionise the underwriting world, and my pick is it is going to happen a lot quicker than underwriters are prepared for.  Resistance to change will fall by the wayside when their masters learn of the cost savings to be made, and the improved outcomes these new techniques will deliver, particularly when underwriting for critical Illness and disability products.

The tag-line of the future?……  Life insurance premiums as unique as your DNA

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Broker breaks the mould

Posted by admin

I read with interest an article by Des Morgan in ScoopIt, “Start-Up Online Life Insurance Firm Breaks The Commission Mold”.

Farmers seeking to protect their revenue in the event of illness and provide the funds required for estate succession planning now have a more affordable option with the launch of a new online website insurance provider.

Online website insurer helps farm owners protect their key farm workers so they have the funds readily available to replace their farm worker in the event of illness or death and keep the farm ticking over.

Director Des Morgan says insurance is essential for farmers whereby funds may be required to assist with children who eventually want to take over the family farm, or to buy out siblings who elect not to be actively involved in the family business.

“Traditional forms of insurance for farmers have worked well in the past but now the advent of the internet can offer farmers discounts which save thousands of dollars in premiums by slashing commission fees by 50 per cent,” Morgan says..

“Many people don’t realise it but if you have signed up to pay three hundred a month in life insurance, then the broker has just walked away with a sizable, five to seven thousand dollars in commission,” he says.

That’s an average commission of 150-200 per cent on a client’s first-year premium. Morgan says the internet can provides a significant saving for its clients by having them complete their own needs analysis.

Insurance4me is “no-advice” insurance provider which surveys all the major insurance companies, seeking the lowest premiums for farmers. “No agent calls with our service, but consumers can complete their own needs analysis via independent sites”. These include and

“Instead, the onus is on the client to complete their own needs analysis and identify the amount of life insurance which meets their own circumstances. In return we discount the commissions by a minimum fifty per cent,” Morgan says.

With the Investment Savings and Insurance Association (ISI) saying that many New Zealanders are still inadequately insured and continue to risk their financial security by failing to protect their greatest asset – themselves, Morgan believes bringing down the cost of insurance for consumers will go a long way to resolve this problem.

“After you take away the typical household mortgage, insurance is one of the biggest drains on a family and an individual’s income. But by using this website, they can now take advantage of some real savings,” he says.

“This means the savings made on insurance premiums can be spent on retirement plans like KiwiSaver, reducing debt, paying off the mortgage or investing in your child’s education,” Morgan says.

Morgan has a vast amount of experience in the industry, including eight years as NZ broker manager at Colonial Mutual Life and as a director of financial planning firm Endeavour Financial Services Ltd, which already has more than 1500 clients.

Morgan sees the introduction of an online business to his existing firm as an opportunity for clients to use a less personalised, low cost DIY service.

In an economic climate which is still uncertain, Insurance4me gives consumers the tools to take control of their life insurance, says Morgan.

Morgan uses Pinnacle Life as the first port of call for life insurance quotes, simply because they offer the cheapest term life insurance rates on the market. However he has agencies with all the major insurers.

If the client has a preference for other insurers such as AMP, AXA, Asteron, Sovereign, Tower, One Path (ex ING) and Fidelity Life, Insurance4me reduces its commission by 50 per cent to provide the 10 per cent discount on the life of the premium.

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Winning is lifesaving…

Posted by Steven

It would be remiss of me not to write an article about the Rugby World Cup, and life insurance. How could I let such an opportune moment slide by without giving the lighter side of the important role sport events plays in our industry?

Let’s start with the car keys, that silver and brass jingle in your pocket (or so you thought), essential to getting back home in time to watch the replay. Statistics show, that your keys are the most likely item to be lost at a major sporting event. After a major sporting event, a stadium will receive on average 70 calls for lost keys. It may well be the levels of intoxication that predicate these lost keys. A study conducted by the University of Minnesota determined that one in every 12 fans leaves a major sporting event intoxicated.

It turns out that all types of motorists — not just pizza delivery drivers — are at risk on the roads after a major sports event. A study published by the New England Journal of Medicine tracked driving deaths on 27 consecutive Super Bowl Sundays discovered a 41% jump in the number of fatalities in the hours after the game than in the same time period on all other Sundays.

The study also reported that the number of crashes in the state of the losing team rose 68% after the game, compared with an increase of just 6% in the winner’s state.

So let’s keep the road fatalities down to an absolute minimum. …. Go The All Blacks!

…and click here to see what you’d pay for life insurance

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