Immigrants have differing view of income protection

In the second part of his series on income protection sustainability, Jon-Paul Hale says there is a cultural side to claims which is overlooked in research.

Monday, February 3rd 2020, 8:00AM

by Jon-Paul Hale

Focusing on the subject of people being more likely to claim – there are two parts to this:

Firstly, in the piece Partners Life managing director Naomi Ballantyne wrote for ASSET Magazine, she rightly spoke to where the insurer gets selected against by those most likely to claim as the premiums are expensive; people take the risk if they feel they have good genes; and we have ACC in place. The issues of sustainability are nuanced and will vary by insurer experience too.

The other aspect is better awareness; people today have a much better understanding of the world around them, and what insurance products can do. Also, better advice vs sales with clients will have had an impact. My clients call or email me on every medical event so that we can help with claims as soon as possible. This, too, increases claim rates.

There is also a changing landscape. The majority of my clients are immigrants or people directly descended from immigrants. Where their home country doesn’t have ACC or decent public health support, these clients know and understand the value of insurance, which has also been a significant change in the past 20 years.

The contrast here?

The "she’ll be right", battle through approach to adversity has its limits, and when you’re servicing a $500,000-plus mortgage on two incomes, that limit comes into focus very quickly.

Cost of living and the change from single-income to required double-income households has an impact on the need for insurance and the rate of claim.

I have many clients that have had the attitude when something has happened of: "We’re ok, we can get through this without needing to claim." Which is excellent; their plan B safety net is working without the need for insurance in the short term. These are the same people that get embarrassed about claiming when their plan B funds dry up too.

So there is a cultural undertone that is not represented in past research, which I also suspect is not well catered for or captured with the current study. In my experience this has often been the gaping hole in any research, it fails to include the psychology.

I do take some umbrage that there are sustainability issues due to the increased ability to claim. That's the point of the bloody contract!

I’ve written on this subject in the past, and nothing has changed; except premiums have increased, and benefits have widened.

It is dangerous territory for an insurer to be inviting the regulator to regulate product design on this basis. It has the potential to be very disadvantageous to the disabled policyholder.

It is up to the insurers to build sustainable products, not the regulator to tell them how.

Tags: Income Protection insurance Jon-Paul Hale Opinion