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Solutions

Trauma Cover

Steve Wright

GM Product

Disclaimer

The content of this presentation is for information only, may be speculative, is subject to change and is not a substitute for commercial judgement or professional advice, which should be sought prior to acting in reliance on it. To the extent permitted by law, Partners Life and its related companies disclaim liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to, or in reliance on, the information supplied.

Advisers are urged to do their own research into matters contained in this presentation.

Where any conflict arises between what might be said herein and any policy wording, the policy wording always prevails.

Moderate Trauma Cover

Why Moderate Trauma Cover?

• Trauma cover has become so generous and so costly that it’s arguably not fit for purpose

• Trauma cover premiums are funding small or no risk but not adequately protecting against big risk

• We must get back to the principle of indemnification

• What is the need?

• Clients don’t need claims paid unless they have financial losses

• They don’t need to pay premiums for insurance that doesn’t indemnify against loss

Moderate Trauma Cover…

Cuts out (expensive) claims with immaterial financial consequences, allowing:

• Clients to afford higher sums insured – giving them better protection

• Better future price sustainability

• Better control for advisers - fine tuning severity-based trauma solutions


• Designed to be around 20% cheaper (but we expect this price differential to grow)

• Designed to be a mid-range (between TC and STC) trauma cover option

• Essentially the same as Trauma Cover but with some more seriously defined conditions

• Does not include built-in TPD as a condition


As with Trauma Cover…

• Includes diagnosis and partial payments built-in

• Includes Terminal Illness as a built-in benefit (stand alone cover)

• Optional Moderate Trauma Buy-Back is not limited to once only

• Expires only on death or cancellation

• Free built-in $50,000 cover for children (plus $450,000 if underwritten)

(Please note the free $50,000 children’s cover is limited to $50,000 per child across all products/policies)

Condition definition difference…

See our FAQ doc for differences I trauma condition definitions

Cancer

Covers stage II or equivalent Cancers:

• Malignant melanoma Stage 2b, or Clarks Level 3, or where there is evidence of ulceration; or

• Prostatic cancers described as: TNM Classification T2; or Gleason Score of 7 or more; or

• Chronic Lymphocytic Leukaemia Rai Stage II (2); or

• Lymphoma classified as Ann Arbor Stage II (2) or;

• Any other tumours classified as Stage II (2) based on TNM classification or above.

Condition definition difference…

Heart Attack

• Requires evidence of more than just death of heart muscle:

It requires the rise/fall in cardiac biomarkers; and blockage of one of:

• 2 coronary arteries; or

• left anterior descending artery (LAD); or

• left main coronary artery.

Who is Moderate Trauma Cover for?

• Cost conscious clients

• Retired clients

• Business clients

• Combine with TC and STC to create the right ‘trauma solution’

• A severity-based approach makes great advice around trauma risk easy; and, more importantly

• Allows clients to afford enough cover for the financial risk they face.

Who has trauma risk?

Almost everyone

• Families - all members including:

• Those ‘not working’

• Children

• Businesses

• And yes, even wealthy people

• For whom it is often mainly about asset protection

What is trauma risk?

For families it’s financial loss caused by severe illness…

• Medical costs – especially treatments not funded by

PHARMAC or medical insurance

• Loss of revenue/income

• Support person cost/loss of income

• Loss of life opportunity

• Loss of life choice

What is trauma risk?

For businesses it’s financial loss caused by…

inability of owners or key employees due to severe

illness…

• Loss of revenue/income

• Debt repayment

• Shareholder buy-out

Best advice?

Recognise the risk

Quantify the risk (more on this later)

Indemnify against the risk? or

maximise claim opportunity?

• I don’t think its about maximizing the opportunity to claim!

• I think its about adequately covering the assessed risk, efficiently.

(Enough cover at an affordable price)

Insurance a solution?

Insurance is really the only solution for families

(there is no such thing as self-insurance)

But…

Traditional comprehensive trauma insurance is arguably no longer fit for purpose

• Trauma insurance has become too generous (too expensive)

• It pays benefits (that cost insurance companies a great deal) for conditions that cause inconsequential minor loss.

• Most cannot afford the amounts of cover they really need!

Partners Life’s approach (for family protection)

Is not to use one product to try to solve the problem (affordability and consequent chronic under- insurance)

but…

To provide the building blocks advisers can use:

• To create very flexible, unique trauma insurance solutions for each client; which

• better indemnifies them against their actual risk.

Partners Life’s approach

To achieve this we need…

• Cover amounts better aligned with financial risko So, making high sums insured affordable where needed

o Recognising the very first (and only) trauma event may be severe!

• Efficiency o it should not force clients to pay for claims they don’t need

(those that pay more money than their resultant financial loss)

• Simplicity (it should not be complex)o after all you have to ensure your clients understand it!

• Flexibility o solutions to almost any trauma need

Partners Life’s solution

Three traditional trauma products (building blocks)• Each product separate from the others• Each available in combination or on their own• Each addressing different trauma risk level• Each focusing on efficiency (priced separately) – not

making clients pay for what they don’t need• Each following the same ‘simple’ approach

• Easy to understand• Easy to explain• Easy to apply to risk• Easy to recommend

Partners Life’s products

Trauma Cover (most generous/expensive)

Moderate Trauma Cover (moderately generous/less expensive)

Severe Trauma Cover (only covers severe trauma condition/much less expensive)

• All three are the same well known trauma insurance product types

• The difference is in the severity of/conditions required to trigger a claim

What we need to consider

One single product might work for some clients (particularly business clients) but many need a combination to create the right ‘solution’

A severity-based approach using multiple products…

• makes quantifying family risk easier;

• makes recommending trauma risk solutions easy; and, more importantly…

• allows clients to afford enough cover for the financial risk they face.

How might this work

Let’s explore an example, comparing Partners Life products:

• A comprehensive trauma product based recommendation; versus a

• Solution based (multi-product) recommendation.

Client is FNS age 40

Her total assessed needs, if she suffers a severe trauma, is $600,000

How might this work

You could recommend $600,000 of Trauma Cover

• But this costs $185 per month (stand-alone cover with no options)

Your client might even take this

• But what if she doesn’t?

• What if she only takes the Partners Life average of $100,000?

She is instantly severely under-insured!

Severity based solution

Is separating her trauma risk a better solution?

Trauma risk is difficult to quantify definitively, but:

• I think its more accurate if the risk is broken up into minor, moderate and severe; and

• I suspect this is easier for you to do and easier for clients to understand.

So, for instance, and using our example…

Total Trauma Risk Minor Moderate Severe

$600,000 $80,000 $200,000 $600,000


Then we simply apply the appropriate levels of cover!

Trauma Cover first


$600,000 $80,000 $200,000 $600,000

Trauma Cover $80,000


Severe Trauma Cover


Then top-up to $200,000 with Moderate Trauma Cover


$600,000 $80,000 $200,000 $600,000



$120,000

Severe Trauma Cover


Then top-up to $600,000 with Severe Trauma Cover


$600,000 $80,000 $200,000 $600,000



$120,000

Severe Trauma Cover

$400,000

This Partners Life approach

• Is very flexible

• You can mix it up anyway the client’s need dictates

• Allows multiple claims for progressively serious conditions (even if it’s the same or related condition)

• Is efficient. Because each product is individually priced, it does not force clients to pay for minor claims they don’t need

• It’s easy to explain to clients

So what is the premium due in ourexample?

Product based solution costs - $185 per month

This severity-based solution?

-almost half at $98 per month

Which is better for the client today?

Which is better for the client in 5 or 10 or 15 years?

(we think trauma insurance premium rates will keep rising but MTC and STC will be more price stable)


Incidentally, you could have recommended any combination of sums insured!


$600,000 $80,000 $200,000 $600,000



$150,000

Severe Trauma Cover

$300,000

So what is the premium due?

This option costs a bit more, because more cover is taken at the ‘low severity’ end

Monthly premium is now...

- $116


Or…


$600,000 $80,000 $200,000 $600,000



$200,000

Severe Trauma Cover

$100,000

So what is the premium due in ourexample?

This option costs a bit more again, because even more cover is taken at the ‘low severity’ end

Monthly premium is now...

- $153

Still lower than $185

And this might be the preferred option now, considering cover can be transferred to the less expensive products at any time in the future (without underwriting) as premiums increase with age

Advice issues…

• Understand where Moderate Trauma and Severe Trauma Cover fits so you can give your client enough information to make an informed decision

• Sell solutions not product?

• Consider future needs - convert to MTC or STC if TC becoming too expensive (affordability option)

• Consider price sustainability – we think MTC and STC will be more price stable than Trauma Cover

Please remember

I have not dealt with all the detail today

Study the various options very carefully

Take time to read the information and policy wording

Thank you for your time

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