Latest Poll – Severity-Based Trauma Products

Should there be more severity-based trauma product solutions made available in the Australian market?

  • Yes (66%)
  • No (24%)
  • Not sure (10%)

Last week’s launch of ANZ Wealth’s OneCare Severity Trauma product option places a renewed focus on the merits and value associated with severity-based critical illness contracts. Our latest poll is asking whether you want to see more of these products introduced into the Australian market.

Severity-based trauma products have proven to be a significant success in South Africa, where the product was first offered. When Macquarie Life Active was launched into the Australian market in 2010, the insurer noted that it took only three years for every insurer in South Africa to offer severity-based trauma solutions after the first product was launched.

In Australia, however, the take-up has been slower. Seven years since the launch of Macquarie Life (now Zurich) Active, the market now has access to OneCare Severity Trauma, while CommInsure offers an ‘evidence of severity’ option where, for a reduced premium, the qualifying hurdle to make a successful claim is raised.

…the Australian market as a whole has yet to embrace severity-based trauma insurance

At least one direct-to-consumer product offers a tiered structure of trauma insurance benefits based on severity, but the Australian market as a whole has yet to embrace severity-based trauma insurance.

Why?

Some industry contributors have previously suggested the demographic of the Australian market is not as well suited to this insurance product solution, while others have pointed to a greater need – a greater imperative, for insurers to deliver appropriate life insurance product solutions linked to rollover and superannuation products.

Add to this the general upheaval in the Australian life insurance sector as a result of the fallout from the Global Financial Crisis leading to the implementation of the Future of Financial Advice and Life Insurance Framework reforms which, together with the introduction of the Australian Life Insurance Code of Practice, appear to have curbed the momentum within life companies that is needed to research, develop and launch new risk product solutions.

Have you implemented a severity-based trauma product solution for your clients as yet? Do you hold that these products can offer a more tailored solution for the client if their circumstances dictate? Do your preferred providers offer this product option? Should more life companies include severity-based trauma products in their menu of solutions?

Let us know what you think and we’ll report back next week…

  • Old Risky

    I studied the Macquarie offering in fine detail. I have sold two of those. I still hold the view that severity based trauma is for the sophisticated client, not mum & dads.
    The problem is since 1990 lump sum trauma has been understood by the average consumer as a lottery win for a heart attack etc. Yes that’s our fault, as advisers as a whole.
    Adviser compliance for a policy which provides PART of the sum insured depending on medical opinion, is, in my view, liability city for litigation lawyers. Advisers better have watertight signoffs.
    Apparently, the ANZ product is targeted at being less expensive than conventional products
    One thing I do know severity based trauma policies should never be sold under GENERAL ADVICE.. Take note ASIC

    • Squeaky_1

      I agree Old Risky. I personally find the new policies very complex and difficult to explain to clients. For this reason I’ve stayed away from them. Zurich also has a good one from all indications. Mind-numbingly difficult to fathom though. I understand the products but find I can’t explain them as ‘confidently’ as the old style ones. I can explain the concept, no problems. But with these newies there really is a lot of devil in the detail. The old chestnut that people won’t buy what they don’t understand is true here so I’m giving the product line a wide berth for now. The old style is hard enough for the mums and dads to wrap their head around. Add the litigation risk you mention and that’s it for me! KISS!!!!

      • Ian Hamilton

        I disagree with both comments, the current Zurich product is the previous Macquarie Active. And obviously Zurich could see the benefit and success of this in just 6 years so bought the book..!

        • Ken

          Hi Ian
          Sorry for such a long break between comments
          Macquarie was a great product sold many to our clients with success and I hope a good understanding of the product and its values
          The problem going forward is that the Zurich equevalent is not as good and like any “take over” sale or call it what you will I wonder how long before this becomes a so called “legacy” policy and premium increases push the client out
          Having done dozens of policies With Macquarie I found them pro active and with true determination to supply the best possible cover at the best possible rate
          We were assured by Zurich these premiums would remain constant for new business with very little change
          Guess what ? Wrong Current IP income protection premiums are some of the highest in the market keeping our clients in a shell until the next premium
          increase outside of the normal age and indexation increases hits home
          It is only a matter of time before we have our clients back saying What’s this enormous increase about ? We cannot afford this
          Sound familiar ?? been going on since Jesus played five right for Jurusalam It won’t change !! definitions will become tighter than ever and premiums will continue to rise
          It’s this mercenary world of insurance we now live in Profit equals shareholder happiness