Partners Life market changes

Jon-Paul Hale with his critique of the Partners Life commentary and what to watch when considering replacement business.

Thursday, July 16th 2020, 9:47AM

by Jon-Paul Hale

Jon-Paul Hale

Yup, dedicating this one to one company, for a few reasons. But more specifically for positive reasons and advice.

You've all heard my views on disability covers and my dismay on the approach that PL have had there, I'm not going to rehash that here, it's been done.

My point here is more about the advice you are giving and the noise in the market that I'm hearing, and it's not great.

One of the common comments I have heard is "Partners have shot themselves in the foot, and others are better", yes, for income protection for new cover. But hold up a minute when you're talking review and renewals on existing covers.

Yes, the optics of the Partners Life premium increases look poor, especially to those clients getting their year-one renewal.

However, when you unpack it, there is something quite interesting unfolding that needs some pause.

Yes, Partners Life could have done a significantly better job of advising the renewal this year, rather than the bog-standard renewal letter clients read. No, as much as we like to think clients read and listen to market noise, they largely ignore the industry – that is until they get "bill shock".

I reviewed a client a few weeks ago and all of the mail from their insurers in the last 12 months was on the table unopened. Yup, we assume far too much about consumers being informed of a change in our industry.

For another client: "Here's your 37% premium increase, and by the way we have increased your loyalty discount by 1%." Frankly, it was received with justified derision.

Yup, I did say positive. Just clearing out the crap first.

When we step back from the horrible communication to the clients and the abysmal bill shock, there's actually still a couple of gems in there. And a few fish hooks.

What advisers need to understand is Partners Life have moved out of the startup growth phase, they had great products at exceptional prices and bought the market, and their market share.

Anyone with half a brain could see that – and they also knew that it wouldn't last – there would be a time when premiums and products effectively merged to be the average in the market.

In mathematics, it's called regression to the mean. You cannot avoid it; it will always happen given enough time.

With the renewals I have seen to date, there is a very interesting pattern emerging. The premiums for the renewal are within a few dollars of the rest of the market, with the exception of AIA. (QPR with the equivalent cover options/benefits.)

Now let's talk apples for apples here. While the others have aspects of accidental injuries, trauma and TPD in them, AIA's disability products don't. So they look pretty good by price.

Also, there is the TPD in trauma to consider as well.

However, when you look at claims, and PL noted a few years ago this applied to them, most disability claims start with either trauma or injury. So these missing areas of AIA's product, and others by default, have a significant lesser response to an event than the PL products.

When we look at this on a genuine apples for apples product structure response to events, with the extra bits added to AIA, the premium for them is also much the same.

So with the noise out there about "Partners have priced themselves out", be careful. On an apples for apples basis, they don't appear to have done that.

Additionally, as we have seen with the recent NZHL story, how you advise and complete the business replacement advice is going to be critical. (I'm not commenting further on that case as there's still a lot more to that story to come, as there always is in headlines from purely a client approach.)

When you decide you have a better premium for an existing PL client elsewhere, be very careful in how you advise your client.

The loss of benefits in the name of saving premium, without good disclosure from you and understanding by the client, is going to create an advice issue for you in ways you haven't seen before.

Everyone is watching everything. As recent comments from the IFSO head suggest they are taking a very poor view of cases where adviser conduct is an issue, and this is part of that too.

If you're all about sales, then you have a problem brewing. As this stuff needs advice and simple things can become significant issues.

One claim I had last year demonstrates this well – simple things like allergies – we caught it, and it was disclosed with the new cover, however, how many would have ignored it or not asked the question?

In this case, it became a pivotal point of the condition(s) being investigated, and declines for cover around what are often perceived to be simple things can turn into significant claim and complaint issues. The nuanced aspects of severity, in this case, became a point of contention.

What was a fine point on what was a minor condition. Akin to "I get sunburnt when in the sun too long", this wasn't a chronic condition by any stretch. And this was new cover not sourced from replacement.

You take a benefit on the face value, and replace it without looking at it; you're going to be putting yourself in harm's way big time.

And that is what is going on out there at the moment.

Regardless of the label, AIA or otherwise – if you are not selecting the comparable options for the cover and you are not advising clients on the loss of cover, ancillary benefits included that are a reasonable chance of a claim, then there is likely to be challenges and complaints in your future.

Sounds harsh and overblown? Maybe, but the jury of public opinion is going to hang you far quicker with this stuff than the regulator. And the public visibility is going to drive priority and focus of the regulator.

Is it all too hard? Maybe. And that is also part of the decision process you need to work through in applying for your own FAP or in looking to join someone else's, if they will take you.

If you can't hold your own feet to the fire on professional standards, you really do need to consider alternative options than being a FAP.

Tags: AIA Disability insurance FAP Income Protection insurance Jon-Paul Hale Life insurance Opinion Partners Life TPD Trauma