Insurance

Many of us would have trouble picking between the various products and categories of life insurance if they were presented to us in a line-up.

But what could be more important than protecting your livelihood and your family’s wellbeing from the risk of injury or death? When you put it that way, not much.

Yet the underappreciated souls working to design and sell the products that pay out in the event of death, disablement or income loss are adamant that Australians are underinsured.

The right stuff

Tapping into the expertise of our partner Rice Warner Actuaries, we bring you a cheat sheet on the best-of-the-best products in what can be an inscrutable business.

The scoring methodology recognises the trade-off between price, features and, perhaps less obviously, the financial strength of the organisation providing the cover. The last may seem an obscure criterion, but being confident the insurer will be around to pay out your claim is crucial – just ask those who held policies with defunct insurer HIH.

Rice Warner comes up with the winners by giving points for the features of the policy. A score is also assigned to the relative price of the products, assessed across a range of ages, occupations and sums insured and including factors such as sex and smoker status.

The highest mark goes to the best product that’s consistently cheapest across the spectrum of potential customers. Using a rigorous and independent methodology, you know Financial Review Smart Investor Blue Ribbon Award winners are the best of the best.

Many of us have life insurance through our superannuation fund but, on average, people insured in this way have only half the cover they need, according to research by life insurance industry group Lifewise.

Despite such unpromising figures, recent times have been good for the so-called “risk” business. Life insurance executives report increasing growth in the number of Australians taking out policies, and products continue to be updated and improved in this competitive market.

In 2010, Asteron’s Lifeguard Life Cover took out the Blue Ribbon Award for best term life/TPD cover. (TPD pays a lump sum if you meet the definition of being totally and permanently disabled.)

Our judges lauded the balance between features and price and its comprehensive list of benefits and options. Of particular note, says Rice Warner, are Cancer Cover, the Healthy Plus Option and the Partial TPD option.

Life cover is the simplest of the insurance products, the basic premise being that when you die your family and/or loved ones receive a payout. Simplicity makes cost a prime driver for customers.

“Lifeguard is a very premium-dominated product,” Asteron’s executive manager of life risk products, David Wright, says. “We reduced our rates earlier this year and passed this on to our existing policyholders, because we like to reward loyalty.”

Asteron went further to give back to loyal customers. The insurer offers “level premium” cover to age 70 (as opposed to “stepped” premium cover, which increases in cost as you age). In 2010 it introduced a bonus $15,000 of free funeral cover for anybody who has held a “level 70” policy (that is, one with that expiry date) for at least 10 years. The cover is guaranteed for the life of the customer, even if the policy isn’t in force at the time of their death.

Wright says Asteron is also rewarding its healthier customers by providing a 20 per cent discount guaranteed for the life of the policy, even if the holder’s health deteriorates.

Naturally, Asteron is keen for its customers to remain healthy. The company is doing its bit to improve their well-being through its Life! program, aimed at helping policyholders better their health.

Peace of mind

Being able to present potential customers with an entire package is important. Just as Asteron has a suite of products under LifeGuard, ING has its OneCare range. And ING’s Income Secure Standard from that suite beat a tough field to become income protection product of the year.

Australians dodged a bullet when the near collapse of the global financial system failed to derail our economy. In the depths of the crisis unemployment was forecast to go as high as 9 per cent, though fortunately it settled much lower than that.

It was a reminder nevertheless of how vulnerable people can be if they lose their income, something that can be insured against if illness or injury are to blame.

ING Australia’s head of retail products, Gerard Kerr, says the past 18 months have been a period of strong growth in demand for insurance that fills the gap when income stops flowing temporarily.

“Your most important asset is your ability to earn income,” says Kerr, who believes the beauty of income protection insurance is that it gives you independence.

“Independence is linked with peace of mind. What makes you comfortable is that you still have your choices, and having options and choices is independence.”

Rice Warner says the Income Secure Standard product has a strong balance of price and features: it’s “extremely competitive in price across the wide spectrum of occupations, from professional to heavy manual, and across different ages.”

Kerr says OneCare has been delivering quality benefits since 2005 and the insurer is wary of compromising the solid foundation it has built by changing the offering too much.

“What we also try to do is create different solutions for different segments,” Kerr says. “In July we broadened our coverage to 70 new occupations in mining, and that’s the result of quite a bit of research work in terms of trying to understand what you’d need.”

A new parent company – ANZ Banking Group – with even bigger financial clout adds further value in the actuaries’ eyes.

Kerr says the recent announcement of a new name, OnePath, following ANZ’s purchase of ING Australia’s wealth management and insurance businesses, signals the next stage in the business and its integration with the banking conglomerate.

Traumatic times

While hardly strangers to our awards, Asteron and ING have displaced 2009’s winners in their respective categories. Completing the trifecta in the trauma insurance category is AMP with its Flexible Lifetime Protection Trauma Optimum Cover.

Trauma insurance provides financial assistance in the form of a lump sum upon diagnosis of specified medical conditions. This one-off payment can help meet expenses such as a medical procedure or house modifications, or be used to replace lost income.

AMP’s fully-featured crisis product takes the gong for its winning range of conditions, says Rice Warner, including heart conditions, cancer, stroke, chronic neurological conditions, psychiatric conditions and respiratory diseases – all that at a competitive price.

In an industry that seems to bustle with news and initiatives, AMP this year brought together its group and retail life insurance divisions. That created a few challenges, says AMP Financial Services’ director of wealth protection products, Michael Paff, but it also brought a cohesive approach to the business.

One of the initiatives aimed at making the underwriting process easier for both the client and their financial planner – if they use one – is the “concierge” system. An adviser can ring AMP, explain the client’s situation and then receive a quote and case number. If the client decides to take out the insurance, all they need to do is quote the case number and the whole underwriting process is simplified, Paff says.

The same process applies when it comes time to make a claim. “It makes sure you go back to the same claims process officer,” he says.

Paff acknowledges that the take-up of trauma insurance is quite low because of the expense. To address this, AMP is embarking on an education process to explain that the relatively high cost of the product relates to the high incidence of claims and the success of those claims. In that sense, trauma cover is a victim of its own success. “Trauma isn’t allowed in superannuation,” he says. “That doesn’t help the education process.”