[GRTV] Get the country’s under insurance back on the agenda

Life insurance statistics for September have seen an uptick in lapse rates says Asteron Life executive general manager Grant Willis.

Wednesday, December 6th 2023, 12:08PM

by Andrea Malcolm

Anecdotal feedback from advisers is that they are starting to see more pressure on household budgets which is impacting affordability.

Willis says he hasn’t yet seen evidence of it slowing new business and isn’t sure it will because a lot of the need for insurance comes out of the discretionary spend, whether it’s a need to cover debt or various household risk issues.

But Asteron Life is seeing a tick up in lapse rates - not only cancellations but with people altering their policy to reduce premiums and scale the sum insured back but hopefully maintain a level of cover which is important.

Willis says Asteron Life products provide flexibility for advisers to work out how to make cover more affordable as a package, for example, being able to split the covers between level and yearly renewable term which increases as customers age, and inbuilt premium holidays that people can take under specific pressure.

Asteron has seen strong growth in its levels offering which creates certainty for people as they age and insurance gets more expensive, he says.

Do levels polarise advisers?

No, says Willis, because they can create combinations within the same product and pick a level of cover and a level of YRT. That makes it flexible in terms of being able to design something that will take the customer all the way through their life cycle with the ability to flex when for example they have to cover a debt.

Asteron’s lapse rates are slightly up on a year ago but the company has one of the best lapse rates in the industry because of the flexibility of the product and the company’s overall proposition, he says.

“We’ve launched some services that are very valuable as tangible benefits on having a policy such as the Asteron Connected Care, which is a virtual help offering which gives people immediate access to benefits when the problem is that the event itself can often be very infrequent on terms of a claim or terminal, whereas how do you have a proposition that is delivering value pretty much every day of the week? That’s where we’ve found a really significant benefit.”

Adviser profile changing

Willis says there’s been a lot of consolidation through the licensing process and some people have exited the industry but a lot of new advisers are coming through.

“People in their early thirties, maybe in their second career and coming out of professional areas is pleasing to see. It’s probably a net loss at this stage but there is a ramp of new advisers coming through. But a refresh and turnover is healthy for the industry.”

However, “you can’t get past experience,” he says. “Advisers who have seen the various economic cycles and relate that into the proposition they’re giving the customer are still very valuable.”

He is also seeing a generational change where sons and daughters are following their parents into financial advice.

NZ’s under insurance problem

Willis doesn’t have a problem with the principle of the previous government’s proposed income insurance scheme, but with the design and implementation. He’d like the new government to help the industry facilitate solutions and change that would address that problem.

“I don’t have any problem with a degree of a compulsory product that might sit above a social welfare net and below a fully advised proposition.

“What I would love to see is the ability of a product and a relationship with advice to flow through as the customer’s needs change.

“So we need a coordinated design of a process that will scale with customers as their needs change and the best people to help with that are advisers who can work with a range of offerings.”

So the compulsory level would be provided through the private sector rather than public which is what the previous administration wanted?

Willis says yes, he thinks there is a solution out there that has a pooling aspect and a level of coverage that makes it more affordable and gives it scale. There would be some thresholds limiting it to a certain level, as with the proposed scheme, but in a way that can be facilitated into more complex needs as customer needs change?

NZ has the opportunity to look at the rest of the world for best examples but design something suitable for our environment, scale and needs. For example not many places in the world have an ACC which would be retained obviously.