Trauma problematic, Fidelity boss says
Fidelity Life chief executive Milton Jennings said trauma insurance is problematic for the industry.
Monday, March 23rd 2015, 6:00AM 
9 Comments
by Susan Edmunds
"The number of claims coming through is very high, something has to be done.
"We're seeing big payouts on minor conditions. People are back to work in three months and ending up with $1 million. It’s a windfall rather than covering a need."
He said that was driving up the cost of premiums and prompting more interest in simple trauma products that would pay out in a more limited number of circumstances. “Companies are looking at trying to strip out benefits so claims aren’t as high and premiums become more affordable.”
But he said it became hard for advisers who had to weigh up the best policy to recommend to a client. If they were recommending a product less likely to pay out, they had to make that clear.
Fidelity Life has launched a new product that will offer cover for up to five different, unrelated events, each paying up to 20% of the total sum insured.
Trauma Multi – Standalone is available separate to life cover.
“Traditionally trauma insurance sees a lump sum paid in the event of a health trauma occurring. New trauma cover could be taken out after a claim, but that would require a new health review which would often be influenced by the illness suffered; therefore affecting future insurability,” Jennings said.
“But this way Kiwis have the confidence that they can receive separate payouts, in the event that they suffer multiple unrelated health traumas. These payments are not severity-based like other products in the market which can make it difficult for the customer to know what they will and won’t be paid out for, without going through a full assessment of both the condition and the severity of it.”
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Comments from our readers
When placed in combination with the standard definition trauma for a lesser amount - say, 1 or 2 year's net income - it is now possible to cover a large financial issue at an affordable price - say the whole $500,000 mortgage. If the trauma is severe enough to shorten ones life, then the larger amount is needed.
The limited 'severe' definitions apply to only 9 of the 46 covered events and are not unreasonable, but it costs 25% of standard.
So, in combination, lets look at a 45 year old who has a heart attack that qualifies under the standard but not the severe definition. The standard contract pays the lower sum assured. Later, however, he has a further heart attack that IS 'severe' and qualifies under that contract, then the balance is paid out.
So, the best of both worlds - affordable trauma that doesn't provide 'lotto' wins for minor issues but does meet the larger financial commitments if the health event is 'significant'.
It used to be that Sovereign & Fidelity were the issuers I'd expect to generate such innovative products, but sadly no. This rehash of what was already a weird hybrid product in the first place from Fidelity and the expensive and complex Progressive Care from Sovereign - neither of these address the issues Milton has stated - higher threshold definitions for claims at an affordable price.
When placed in combination with the standard definition trauma for a lesser amount - say, 1 or 2 year's net income - it is now possible to cover a large financial issue at an affordable price - say the whole $500,000 mortgage. If the trauma is severe enough to shorten ones life, then the larger amount is needed.
The limited 'severe' definitions apply to only 9 of the 46 covered events and are not unreasonable, but it costs 25% of standard.
So, in combination, lets look at a 45 year old who has a heart attack that qualifies under the standard but not the severe definition. The standard contract pays the lower sum assured. Later, however, he has a further heart attack that IS 'severe' and qualifies under that contract, then the balance is paid out.
So, the best of both worlds - affordable trauma that doesn't provide 'lotto' wins for minor issues but does meet the larger financial commitments if the health event is 'significant'.
It used to be that Sovereign & Fidelity were the issuers I'd expect to generate such innovative products, but sadly no. This rehash of what was already a weird hybrid product in the first place from Fidelity and the expensive and complex Progressive Care from Sovereign - neither of these address the issues Milton has stated - higher threshold definitions for claims at an affordable price.
I agree with Majella's comments - the (Asteron) severity-based trauma model is far more logical and likely to be meaningful to clients, than either the (Fidelity) 20% per claim model or the (Sovereign) complex and expensive model.
In the few cases that I have worked on since the Asteron model was launched, I have been able to use the Standard/Severe model to enhance the real benefits for clients.
I subscribe to your service Graeme, but I am detecting some anti-bias with regard to PL - viz the Loss of Revenue rating. The -12 points for "Receivership" and -20 for "Change of Ownership" terms seem harsh, given that other providers apply similar treatments in the event - PL has simply been upfront about it.
As well, I don't understand why the "Definition of Disability" is marked down so much v. others, while "Partial Disability" is not much regarded - given the non-requirement of any term of Total Disability before a Partial benefit can be claimed.
Some products may have a partial disability benefit but monetary results in the client's pocket will be disappointing, or even non-existent, as in some cases the client is no longer partially disabled at all if they can return to work for 20 hours per week!
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Anyone got other thoughts on how this satisfies an actual clients needs?