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Is low-cost, form-free personal insurance too good to be true?

15-Apr-2016 “It’s been touted as a revolutionary shift set to transform New Zealand’s insurance industry. Two of the country’s biggest insurers have recently launched easy, automatic acceptance no advice insurance options. Understandably the insurers behind the new developments are fizzing, but is this new development really a good thing?  

According to the providers, the introduction of automatic acceptance limited insurance options has been designed to make personal insurance more accessible to a wider range of Kiwis. With no forms or medical checks, 100% online application and fulfillment and nothing but a few simple underwriting questions, the barriers to entry are low. It really is a personal insurance option designed with the younger demographic, otherwise known as Gen Y, front of mind.

In my opinion, introducing simplicity, ease and accessibility into the overly complex world of insurance is fantastic. Also any move that helps get younger generations to appreciate the value of insurance is a great thing. But not if it comes at the cost of the integrity of our industry.

New Zealand’s financial industry has come a long way in the last few years. There has been regulatory shift, greater focus on education standards and increased emphasis on providing advice based on skill, due diligence and care. By cutting out one-to-one adviser relationships, eliminating personalised applications and introducing automatic acceptance there is only a limited amount of skill, insight, due diligence and care that the client can receive. While it may aid convenience at the outset, the long-term implications could be significant. Automatic acceptance means that all of the underwriting must be done at time of claim, and as you can imagine this could become a potential nightmare if there are any pre-existing conditions. 

Our whole approach to insurance for clients is very simple – to provide certainty at time of claim. You are always going to get underwritten, this is done either at time of application or at time of claim. That is why we insist on completing all the necessary medical and financial underwriting at the time of application. We don’t like surprises at time of claim and certainly do not like delivering bad news to our clients. My advice to anyone after easy and affordable personal insurance cover is to talk to you local adviser. Simple online cover may not be as competitively priced as you think! But more importantly advisers know all the intricacies of various policies and can quickly advise on the best solution for your needs – best of all, we’ll take care of the paperwork so it really is easy and hassle free.”

Ali Toumadj, Prosper Director