Support and criticism for Cigna move from unlikely sources
Cigna New Zealand’s decision to sell income protection online has drawn criticism – and support – from unlikely sources.
Thursday, March 29th 2012, 7:08AM 
9 Comments
by Benn Bathgate
Former Life Brokers Association (LBA) president Ron Flood applauded Cigna’s move, saying it would make more people aware of the product and encourage more people to get cover.
Flood was also critical of advice industry attacks.
“The problem is we’ve got too many brokers and advisers, AFAs, RFAs, that think they’re the be all and end all and they’ve got a God given right to be the only ones to write business.”
He also said the increased awareness would actually be beneficial to advisers.
“It’s free marketing for us, the more people out there promoting the business, writing the business, the more opportunities are created for us.”
Even if an existing customer opted to change their cover to Cigna, Flood said that in itself presented an opportunity for the adviser.
“We always have an opportunity. Every time somebody rings up a company to cancel their policy they notify the adviser that they’re going to cancel their policy. I know straight away if somebody is sniffing at the door and I can decide whether I want to keep this client and get out and see them straight away.”
He said he then has the option to meet the client, “sit down and talk about it and I’ll show them why they shouldn’t go with Cigna.”
He also dismissed critics who claim the product is too complex to be sold online, conceding that while income protection is a complicated product, “you don’t have to be a rocket scientist.”
Interestingly, criticism for the move – and support for the advice channel - came from online life insurance provider Des Morgan, founder of Insurance4Me.
“It’s too difficult to do online, it’s a lot more technical and there’s a lot more information you need to get income cover, so I wouldn’t consider it,” Morgan said.
“Income protection could be a can of worms, I think people really need advice, there’s too many options available.”
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
Seriously Ron? Seriously? - I think membership renewals to the LBA just took a tumble with that little statement. Ron, let’s set aside “personal opinions” for a minute here and look at what this debate is really all about – having the policy holder’s best interests at heart when they are securing income cover!
The reference to my being Past President of the LBA was not necessary as this was my personal view and most who follow these posts will know who I am.
The message is clear. CIGNA are targeting a market off DIY clients who don't or won't use an adviser. These client's will most likely have no income protection cover at all and will most likely to not have considered it until seeing the advertisements.
You are totally correct that the product may not be the best option for a majority of those taking it out but that is a decision the client makes. It gives us all a great opportunity if we ever stumble across one of CIGNA's client's to advise them of more appropriate solutions.
Remember, the wrong cover in place is better than no cover in place.
The right cover in place is the only option. The wrong cover will create the wrong outcome. And that will reflect badly on the insurance industry as a whole. And will support the type of suppositions that leads the DIYers to the online space in the first place.
The outpouring of sentiment against this new online income insurance makes me proud to be an adviser, even if they all write under funny names. Most advisers are passionate about doing the right thing for our clients, and it is from here that most of those comments come – more so I reckon than 'protecting our patch'. The banks have by and large been doing a terrible job for years in this space, and Cigna's offering is in the same league, and will be regarded in a similar light - just another competitor we can easily overcome.
First off, brokers are naturally biased against this sort of offering. Prescribing it as 'doing the right thing', when it is inextricably linked to personal outcome, is simply self-justification. The fact is that brokers feel threatened, which you seem to think they shouldn't, and so they shouldn't express such nastiness (which leads one to wonder if it isn't defensive self-promotion).
Second, and hinted above, if the opposition are such push-overs then why make a fuss? If the banks aren't very good at offering insurance and there are plenty of alternatives, why are people still purchasing from them? That some of these alternatives aren't person-to-person sales is part of a functioning market (some people like personal attention, others may simply think they need X, Y, and Z). What brokers should be doing, as Ron has correctly identified, is showing how they add value and if someone is only basically covered, through their own choice, then this is a great opportunity to show ones value to them (rather than just complaining about CIGNA).
We could get upset by the raft of products that leave people exposed sold as direct market(DM) products. Already banks sell ridiculous products under the guise of IP and if you download or get hold of the policy documents it is not hard to show the advantages of proper advice. One bank product for example has a disability product that excludes natural disasters, show them that exclusion now and they can't thank you enough.
I agree in part with Ron to a point that any cover is better than nothing, demonstrates a clients understanding of the need for protection and probably wouldn't have considered advice or cover before.
However it frustrates me that people believe they have cover and we all know how limited or challenging it could be to claim on.
Direct marketed life and trauma products also have nonsensical exclusions and limitations and what is annoying to me is that people believe they have good protection, not that no one else should sell it. Some products just shouldn't be out there, i.e. Life Insurance that excludes terrorism, riots etc.
I think Ron's statement “The problem is we’ve got too many brokers and advisers, AFAs, RFAs, that think they’re the be all and end all and they’ve got a God given right to be the only ones to write business.” is ridiculous and not based on soliciting anyone's opinion, maybe his personal feeling, but you can't stop it so make the best of it. It probably detracted from the debate.
It's not about a God given right but knowing the solution I recommended will certainly be more robust than a product purchased as a DM product(which should have been the focus of the article). It's just about the best outcome for consumers at claim time and there is no one size fits all solution. But I applaud anyone who appreciates the value of their income and has taken steps to protect it, online or otherwise, I can work with that.
Firstly, let’s bet on one issue, Income Protection is a complex product which Graeme has correctly stated and it is never until claim time that the truth of this is fully realised. I agree - think the public rarely fully understands the “minefield”; just as many advisers aren’t, as evident from what I was told by someone who had had advice from a bank “adviser”.
My counter to this is I also agree with Ron Flood’s commentary in general. Cigna has simplified their offering and this is worthwhile – there is certainly a market out there for this product but it does not suit the more sophisticated buyer. If a buyer wants a quick fix so be it; something is often better than nothing.
For me though, the big issue in this debate is the apparent fixation around the Benefit Period.
Who has bothered to do the research on what percentage of DI claims is long term, i.e. to age 65? From my 40 years of disability claims experience, I only know of a few claimants whose Benefit has gone longer than 5 years; most have lasted less than 2 years!
The ‘Worst Case Scenario’ argument needs balancing off with reality. That includes reliable research and what the customer can afford. Ultimately our professional advice is only judged at claim time.
After I’ve completed a survey of the insurers’ claims experience I will present what many of you will find interesting research data.
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Mr Flood - The criticism been leveled at Cigna from advisers has nothing to do with a "a God given right to be the only ones to write business" It's actually born of a genuine and sincere belief that providing a client with income cover online (and for 2 years only) is totally inappropriate.
Interesting to see Des Morgan founder of online life insurance provider Insurance4Me agreeing that clients need to see an adviser when securing income cover.