Priorities and ideals

One celebrated robo-advice site does nothing to help the customer decide which insurance to choose when the budget crunch has to be acknowledged.

Tuesday, November 21st 2017, 12:53PM

by Russell Hutchinson

That means pet insurance is effectively ranked as important as health insurance. The most generous interpretation is that they place the more value on the customer’s right to choose than they do on providing the right advice. A harsh critic might say that they simply don’t know how to choose. But, even given my limited knowledge of the provision of health care in the United States, my baseline principle would be that pet insurance is lower down the list than health. Sure, customers with healthcare provided by their employer might have different priorities, but something else would probably still beat it to the budget.

Making fun of other people merely makes one feel superior, but how much better at this are we in New Zealand? Even setting aside questions of the ideal and budgets, merely having a strong idea, based on the ideal priorities, means you can have a better-quality conversation when the customer wants to change them.

First, can you actually rank types of cover in order of priority? Or do they form groups? These days, I would place income protection top of the list, with trauma and life cover together after that, and health insurance last. But I have the luxury of buying them all, and you may have a different view. Some advisers place health insurance first.

Next, are the priorities absolute? Given budget constraints, should you always cut one insurance in favour of keeping the best options and cover levels for the ones higher up the list? If the priorities are not absolute, then how do you trade-off the amount you cut from each? Having a written ideal means you aren’t making it up each time a client calls and asks what the right approach is to reducing total cost. Similarly, you’ll already know where to allocate the money when the budget rises as well. How do you trade-off alternatives? Should we cut total cover, or extending wait periods, or cut benefit periods?

In recent times, I have heard of three trauma claims for less than $50,000. The lowest of the sums insured was just $20,000. One of the cases was a person on a relatively low income who had contemplated cancelling the cover only months before. In the others, there was more budget room – yet trade-offs still applied. But in each of the cases, the adviser was as delighted as ever that the cover had worked for the client. In each case, even small levels of cover – that might have been dismissed as inconsequential – suddenly became very important.

You can probably guess my bias, but whatever the answer you arrive at with your clients, it is worth working on.

Tags: financial advisers health insurance Income Protection Life insurance roboadvice Russell Hutchinson Trauma