December 8, 2021

IDII Series #2 – Transcript

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IDII Series

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Fraser Jack
Thank you for joining us again, Katherine.

Katherine Hayes
It’s good to be back.

Fraser Jack
We’re talking about sustainability, that old chestnut. Let’s let’s have a chat about this particular topic. How do you see let’s start with really are now are we are we still have we stabilized? Are we, you know, other products other than other new products that are coming out sustainable? And what tell us about the old ones? Oh,

Katherine Hayes
gosh, you’d want to hope. So. They’ve been given that mandate to ensure that like our assets are sustainable. I think there’s been so many levers pulled. I don’t think that’s good. I think it’s a fairly safe bet. I’ll say that cautiously. That the new products will be sustainable. But income protection is only part of the puzzle. I really do believe that the next wave we have to deal with will be trauma insurance, I really do think it’s at the peak of generous definitions. And I wouldn’t be surprised to see that being drawn back or brought in great levels of tearing rather than just having 100% or 10 to 20%. I think we’ll start to see more midway options as far as far as benefit payments go.

Fraser Jack
Are we going to be in the same boat with trauma, then if that’s the case is there’s this whole first?

Katherine Hayes
I really wouldn’t be surprised. I think that’s it’s incomplete protection was the biggest one. And it’s so many people have it, that it was a there was a large area. But I’ve also seen quite a few trauma insurance claims where it’s been paid. And you think, Gosh, that really wasn’t needed. As far as the indemnity principle goes, it just accidentally took something managed to provide a decent payout, which is not what it was intended for. Yeah. And

Fraser Jack
if we go back to them with my comments from there, for the first episode, where it’s actually the other people in the pools of money, who’s paying for that claim, not the insurance company,

Katherine Hayes
correct? I mean, if it’s priced appropriately, that’s not a problem. But you know, if it’s not, there’s an issue.

Fraser Jack
So if you’re if your clients getting a payout, then essentially, the other advisors clients are forking the bill for that?

Katherine Hayes
Oh, correct. And, you know, I, I put on a trauma reinstatement option wherever possible. I’ve got one client who is on their third trauma for payouts. I’m a big believer of once you’ve claimed once your chances of claiming go way, way up, and then they do tend to.

Fraser Jack
So do you think there’ll be a first mover disadvantage in the space and so therefore, the insurers won’t do anything?

Katherine Hayes
Other than I don’t think there would be so much in the sense that what we’re starting to see is that insurers are coming out with alterations, but rather than the income protection pace, where people have been forced to use people putting these offerings running alongside, so I think there could be a more of a gentle, either upping the pricing on the existing product, and giving people the opportunity to slide into one of these newer, more sustainable options, rather than the hard stuff that we have with IP.

Fraser Jack
Yes, exactly. So tell us about the, the the idea of the old products then now. They closed? Obviously, they closed books, I feel like when books close, you end up with getting they could become more and more expensive. What’s your experiencing?

Katherine Hayes
Yeah, absolutely. You know, we’ve all seen the, you know, the really expensive, you know, a&p come resolution products, where they just get significant prices year on year, regardless of what the premium structure was, you know, those lifetime income protection benefit policies, they get to a point where your annual premium, pretty much takes up 50% of any benefit in a given month. So it’s, it’s insane. So it’s at the point where people can’t keep them. I mean, it will probably be some time before we see that with income protection. And APRA has indicated that they would love to see everybody exit the current products that are written prior to this and into the more sustainable versions. So the faster that rate happens, a smaller pool that you’ll have left. So it’s like anything, if you were to take all the healthy lives out of a pool, because they don’t need the more generous products, the people that are most likely to stay those who know that their chances of claiming are going to be high. And so they don’t want to give up those generous benefits. So you get a dirty pool, so to speak. So

Fraser Jack
it’s just the compound interest curve, right? It’s just compounds on top of each other.

Katherine Hayes
Yeah, absolutely. So I think we will see continued price increases on the old IP products, whether it’s agreed value or just anything written prior to one October this year. And its advisors are going to have to have that conversation with their clients. It’s do we stay where we are or do we move into something that’s more affordable, and I suspect most people will be having conversations that revolve around what can we do to keep you in this really good product before there’s no other levers to pull like extending waiting periods, going from comprehensive to basic or dropping off other features. But until that happens, you know it time will require it to be played out.

Fraser Jack
Yeah, it is going to play out over time, I guess you could say. So from a sustainability point of view What’s the conversation you can have with the client about sustainability, then that leads into this conversation about where they have their income protection.

Katherine Hayes
I take the view, I focus on what I would do personally, and I have cut the old covers. And my I know that is, for my circumstances, when I look at the layer of that, that I would want to, to keep that in place. And it really is going to come down to those clients circumstances. I mean, if you’re in business, and you’re looking at ongoing income offset clauses, or you know, greater restrictions around there, some cases make sense not to have those, but depending on your structure, it could take a really long time to find something suitable. So if really is going to come down, if they’re happy paying the cover, they value the quality, of course, you’re gonna keep on going with what you’ve got. But as soon as those answers, it starts to become unsustainable for the client, it’s got to have that conversation. And it’s going to depend on what the insurer has on offer for transition pathways. If you’ve got someone really unhealthy, if the insurer offers an easy transition to a new product, and they want to go for it Sure. If they’ve had a bunch of health events, that’s going to be a much tougher conversation. Because you can only look at that transition pathway within that insurer, you can’t look at the broader market, not without seriously giving up some terms and conditions and potential exclusions and loadings, or you stay where you are, and you keep it for a while. So it’s going to take some detailed analysis and looking at the pros and cons on each individual client’s circumstances.

Fraser Jack
It feels like that, as you said that transition is easy transition for a lot of clients where they would have medical issues and not be able to get you know, cover anyway would be would be a good option. Very good. Now, the ID and eyes, the first AI stands for Individual, How sustainable is group?

Katherine Hayes
Gosh, well, the one thing that benefits group is that there is no guaranteed renewability. So what we’ve had with income protection insurance on the retail side is it’s guaranteed renewable, so the only lever that they have to pull is brass, and the groupspaces. There’s no guaranteed renewability with it. So the terms and conditions can be altered at any time. And we’ve seen not only wild price swings with the industry space, we’ve also seen significant changes to the definitions of disablement whether it’s TPD, or income protection. So I what I have seen over the last couple of years is the group insurance offerings are often more expensive these days, at least they are for the demographics that I work with. So I felt I feel like they’ve dealt with the sustainability issue largely already. And they do have more flexibility to continue to do so because they can change those terms. Whenever those contracts go out for 10 days, so they’ve got a little bit of flexibility there. But there are some drawbacks that they’ll never be able to compete with. And that’s a fact that things like income protection will always be wholly owned by a super

Fraser Jack
fantastic, Katherine, thank you for coming on this episode. We’ll catch you in the next one.

Katherine Hayes
Thank you.

Fraser Jack
Welcome back, Jeff.

Jeff Thurecht
Thanks, Fraser. Good to be back.

Fraser Jack
Then fantastic to have you. In this episode, we’re talking about sustainability. A really interesting part of this jigsaw puzzle is the concept of how our insurance can knees going to be sustainable? And how should we be adding sustainability to the consideration when when we’re looking at products moving forward? Tell us about your your views, your ideas around the concept of sustainability in products?

Jeff Thurecht
Yeah, I think the the changes that have been put upon us through APRA as intervention are really big changes. And obviously, they’re designed to drive that sustainability through both product changes and making sure the insurers are having a good look at their pricing. So I guess the first part of it is, we really hope that they’ve got that pricing bit right, in a nice price sustainably, because I think from our viewpoint, as advisors, that the hard part in the recent times, there’s like lots of hard parts with insurance. But one of the hotspots has been that in your conversation about those massive increases in prices. So if they just come in with the right price to start off with, we can handle that conversation once and the client knows what they’re paying and when the value they’re getting for it. So you know, I think it’s in everybody’s interest to get the sustainability, right as soon as we can. From a client’s viewpoint, it’s a difficult one for a client to have the conversation with for a new client. For an existing client who’s gone through those premium increases, year after year, they can certainly get the concept of hasn’t been sustainably priced. But for any client who doesn’t have income protection and is coming in to talk about for the first time, I wouldn’t go I wouldn’t go into a conversation about sustainability. I’d be more talking about how it fits in with their needs and why it’s the best product for their circumstances and relevant at the time. So that’s kind of I guess how we address the sustainability conversation with clients.

Fraser Jack
Yeah, because obviously the price shock that that’s taken place over the last couple of years really has left clients feeling inside Why feeling a little bit, you know, laid down. But I would say, you know, the trust comes into this conversation when it comes to these sorts of price shot.

Jeff Thurecht
Yeah, absolutely. Particularly, I think with the, you know, level premium books and the price rises of those, I think they’re the ones that are really cause challenges because clients thought they had a commitment, whether that was, you know, it was mis sold, or whether it was, you know, the communication wasn’t quite where it could have been. But you know, that was something that was positioned for, it was long term sustainable for the client from a cash flow viewpoint. And that’s where you could bring that into the conversation. But then the step premiums, obviously, getting out of control as well. So the challenge is, obviously, that the existing products are superior in the main to the new products. So it’s about how do you manage that conversation and your ability to sustain those old products? And that I think, is our kind of thinking at the moment is our starting point would be where possible, we find a way to maintain those old agreed value contracts and, you know, work with the waiting periods and benefit periods and some insured and and then think about, you know, is there a role for the newer products to come in? At some point in time, at the moment, I think there’s not a massive discrepancy between the cost, so you’ve got a inferior product, which is priced the same as a really good product. But over the next few years, we know that will change. And that will be a hard conversation to have for our team and the clients that we’re talking to.

Fraser Jack
Yeah, it’s interesting, isn’t it? So that that concept of Yes, you’ve had some Bill shot? Yes, yes, you may have lost a little bit trust, but we also need to align the fact that there’s a, there’s a possibility of a lot of destabilization, still to come in that space, and that at some point, it might be worth considering the new types of products. Just wanted to go back on some of the comments you made about level. Because this has been a really interesting piece for both. For both clients and advisors to cope with a lot of the time, you know, with it, there was always been a, you know, unknown possibility for a whole book to rise at once, etc, etc. But it wasn’t necessarily considered, I think, from advisors point of view to be it’s, it’s coming, it’s coming, just from that trust point of view. And obviously, risk is a product that we need to have a high level of trust in. Do you think there’s been any issues with trust from from the advisors point of view as well as the client?

Jeff Thurecht
Yes, you know, levels of trust with the insurance companies? Massively? Yeah, absolutely. Yeah, it’s a hard one. Because having having been around for a while, yeah, you get to know lots of people. And there’s lots of fantastic people at an individual level, who I really like and respect and value their input. But at an institutional level, I do feel let down. And that that’s a hard thing to reconcile, you know, most mostly around that the pricing issues and the communication of those and how we continue to get that so wrong, and how you know, how that was positioned with us, in the early days of selling these products and advising our clients into those, and then all sudden, we’re seeing something so different, but also, because we’ve known their issues. And, you know, what have we done to address them? And there’s a feeling, you know, we recently had to catch up with our licensee and some of the insurance conversations. And, yeah, there’s certainly a feeling that all of this comes back on to the adviser. So we’ve got to have we’ve got to sit in front of the client and go, yes, your premiums have gone up another 30 40%. Yes, there is an alternative. But it’s not a very good alternative, because the products are inferior. You know, so the insurance companies have kind of foisted that upon us. And I don’t think in the mind, I think they’re trying to do some some stuff to help us get in the mind that haven’t done enough yet to help that conversation and make that easier, because it is a really difficult, time consuming, challenging conversation. But also the process to then make those changes is is not as easy as it should be. So

Fraser Jack
yeah, I couldn’t agree more these, there’s certainly a lot of people involved. And let’s face it, we’re like I said, we know most of them, and they’re they’re all good people, it’s just that the situation is difficult for all parties, not just not just advisors and clients. When we when we look at that conversation of that advice coming back on the advice provider or the advisor themselves, it’s certainly a big piece of this conversation. When it comes to comparing and recommending products moving moving forward. You know, we used to it was quite simple. You look at products and pricing, you can compare those two together, and you look at those two variables, and you work out what’s going to be a recommendation. Now with this concept of sustainability and long term and bill shock, and, you know, stable premiums. Is that, does that leave a third level now of the of the research that you need to do when it comes to you know, price product and long term sustainability?

Jeff Thurecht
Yeah, it does. Absolutely. I think that’s a really important piece. For us. Yeah, it’s not something that the client again necessarily is going to want to be asking about, or we’re not going to be putting that in the SOA necessarily as a sort of key benefit for why I recommend the company but behind the scenes, you know, you know, insurance APL document we’ve we’ve recently added in a column into the spreadsheet, which, you know, kind of powers that the document which talks about, you know, what’s our feelings on the company, where they’re at, what they’re doing, how we’re working with them, how they’re communicating, and, you know, profitability, sustainability, you know, their backing, that sort of stuff. He’s now going in there. Because, you know, we can’t keep doing what we’re doing. And we’ve got to, we’ve got to do our bit to make those changes and think about what we can say that’s definitely an important component of

Fraser Jack
it. Fantastic. Jeff, thanks so much for coming on to this episode. We’ll we’ll check you in the next episode when we’re talking about that mindset that you just spoke about.

Jeff Thurecht
Cool. Thanks Fraser.

Fraser Jack
Thank you for joining us again, Natalie. Cameron.

Natalie Cameron
Oh, hi, Fraser, always, always a pleasure.

Fraser Jack
Fantastic to have you here. Now we’re talking about sustainability. All sorts of things around the products, the new products, the old products, and the stability of those products. So let’s kick off with your thoughts and ideas.

Natalie Cameron
Oh, look, it’s probably not Africa’s place to comment on the on the new products, but I mean, I certainly would say we have had quite a decent number of of complaints in recent times around the the affordability or unexpected premium increases on existing IP products, which is probably not surprising to anyone. And I would, I would imagine that two things, if two things converge, I would expect for there to be a lot less complaints. And I hope that’s the case. Now one of those things is that the product is is more sustainable, that there is you know, and it certainly looks like you know that the changes would would drive sustainability. And then, very importantly, that there is really good communication between advisors and their clients about what the new products cover. So So really just addressing that, that past mismatch and expectations between you know, what the product or the price of the product is, and what actually ends up happening.

Fraser Jack
This is a really interesting piece of the jigsaw puzzle, I think that around complaints is that that expectation and outcome piece of the puzzle. You mentioned affordability, though, let’s let’s dive into that. You know, affordability is one of those things, I always say, you know, the time you most need the cover is that is the time when you can least afford it. And the time, you know, when you can most afford the covers when you don’t need it when it comes to insurance or as much how do we go with affordability from an advisors point of view? Because in should we be really looking at long term affordability and sustainability in a premium versus now sort of? How do advisors do that? Or play that game of long term versus short term when it comes to sustainability or affordability?

Natalie Cameron
Yeah, look, it’s you know, it’s the advisors out there, you know, hats off to them, it’s a tough job. And the reason why people seek their advice out is that they’re so experienced in this, and I think it is, you know, to not sound too cliche, it’s, it’s just, it’s just the balance, isn’t it? I mean, I don’t want to be too boring. But you know, to the, you know, as, as all advisors would know, you know, the cops Act requires them to act in the best interests of the of their clients. And that, that includes very, very importantly, you know, finding out what their objectives, financial situations and needs are, and making reasonable inquiries, and then making sure that they investigate, don’t make sort of reasonable investigation to available products, and then they need to make a reasonable recommendation that’s based on the client’s relevant circumstances. And thing, you know, I can imagine that advisors, you know, considering these new products might be concerned about the coverage. And I’m not saying that they should always favor affordability over product terms. What I’m saying is that they really need to consider the client’s objectives, financial situation and needs and ASIC themselves are very clear that that includes affordability. And also, you know, I guess, Echo these comments that good communication is really the key to making sure you get that balance, right.

Fraser Jack
Yeah, that’s a really interesting part of it isn’t it? keeps coming back down to that, doesn’t it though, that making sure that the clients understand and are on board and understand exactly what’s going on? Speaking of understanding, I guess, I’ve always wondered about this question, but um, is sometimes the complaints around not understanding the information, more around the idea of they they forgot the information because they sort of understood it at the time and then they just never really thought about it over the last couple of years, and now now they’ve sort of didn’t really remember that conversation or How does understanding go with just in some of the claims that you’ve, you’ve looked at maybe when you look at the files and say, Oh, well, they looked like they understood at the time, but they just don’t understand it now?

Natalie Cameron
Yeah. Oh, look, you know, I can’t remember what happened last week sometimes. And that’s very difficult for advisors and, and for, for, for the consumer as well. I think, well, you know, when Africa gets one of these complaints, what we first going to look at, apart from the submissions, you know, from the parties, we’re going to look at the documentation that’s in place. So, you know, the statement of advice or record of advice is required to be there, that should sit out that, you know, that consideration of, you know, of how the product that’s recommended, fits in and meets those, those those needs that were picked up in the fact fine. So, so I guess most importantly, you know, the records of, of advice, but also file notes of conversations that refer to what the client wanted, what they favored more, what was more important, was it? Was it more important that they could still sort of pay for Netflix and, you know, go out to dinner? Or, or were they really focused on, you know, sort of a high level of income protection? At the time. It’s, it’s visible, it’s, you know, it’s the documented evidence of those things. I think, you know, if somebody sort of understood it at the time, and, and sort of forgot it, that’s not really on the advisor. Having said that, it’s really difficult for us to make an assessment of what really happened if it’s not properly documented. So, you know, it’s, again, it’s probably obvious advice, but, but making sure you’ve got great file notes, and that you don’t just use the template SOA, and really consider what that person wants and needs and can afford is really important. I mean, I mean, we often, we often say, Well, you know, if it was somebody in your family, you know, who was looking for income protection? Would you be saying, you can afford this go for this one, it’s still got pretty good cover, but you know, you still going to be able to go on a holiday once a year? Or would you be saying, Look, you know, given given your, you know, worries about, you know, potential medical things or your financial obligations, you should go for the very best, most extensive cover. And that’s just wonderful way of testing, whether it’s really in the best interests.

Fraser Jack
Yeah, great, a little test. The just while we’re on the subject, though, at some advisors record their conversations or record the meetings with the clients, how do you guys treat that in that scenario, rather than say, a documented or final note?

Natalie Cameron
Oh, look, I I. I mean, a lot of large companies have have standard recording. And so we certainly listen to recordings, I just completed a matter where I listened to over 70 voice recordings. And let me tell you, that’s a that’s all takes a little bit longer than than looking at a file. Yeah, that’s good evidence. I mean, I would obviously be very clear with the, with the with the client, that they’re going to be recorded to get the consent to do that. But that’s great evidence as well.

Fraser Jack
Yeah. Wonderful. Now, back to sustainability. I know you’ve spent some time in the past and your past life with group products. And I know, that group group wasn’t included, obviously, in IDI. But tell us about how, you know, you sort of see the sustainability of group products?

Natalie Cameron
Look, you know, I think there are different market forces at play in the group market. At least when I was a part of it, I’m probably not the most qualified now to comment on on, you know, on what’s required there. But, you know, I certainly know that the, you know, the various funds, super funds and employers were really active in considering what was in the, you know, in the best interests of their members. And, and that certainly drove I guess, more more tailored coverage for different funds and schemes. Of course, a huge amounts happened in the market since I was in it, you know, a lot of mergers and acquisitions. And I’m probably I’m probably not the most qualified Fraser on that one.

Fraser Jack
Fair enough. Now, what do you think, you know, with this, I’ve had some comments or heard some comments around the idea of the older products now that they’re closed will be Come, you know, we’ll probably continue to push up in prices as people will start to leave those products. Do you have any thoughts or ideas on how that might play out?

Natalie Cameron
Well, I know there’s been some concern that the, you know, that the, the pool effectively, you know, there’ll be some anti selection in the poor will effectively become the less healthy lives. I think that’s, that’s unfortunately, one of the, you know, one of the potential outcomes, having said that, even people with health conditions may not be able to afford the, the, you know, the continuing premium increases that we’ve seen. And so, you know, it’s a bit a bit of future. A crystal ball gazing, I think. But I think that’s a that’s certainly a risk.

Fraser Jack
Natalie, thanks so much for coming on this episode. We look forward to catching you in the next one.

Natalie Cameron
No problem. Thanks, Fraser.

Fraser Jack
Ben Martin, thank you for joining us again.

Benjamin Martin
Thank you, Fraser.

Fraser Jack
We are talking about sustainability of both the Old World and the New World products. And let’s let’s have a chat about sustainability. why that was such an important aspect to obviously, with the new products.

Benjamin Martin
Yeah, look, it’s at the end of the day, what in our discussions with advisors around the country? You know, one of the fundamental questions that we start off with is, you know, why are we having this discussion in the first place? And the answer will typically come back to the, the out of hock there, sorry, the ad hoc out of cycle rate rises, that right, that ran rampant through industry in the old world. And at the end of the day, our advisors and our clients, they’re sick to death of these out of cycle ad hoc rate rises. And so the feedback we’ve been getting from a lot of advisors around the country is we fundamentally need to look at building products in a way that is, let’s call it sustainable, so that clients, and indeed, advisors are liberated from those pricing pressures that are prevailed, and wreaked havoc across the retail life insurance industry as of late. So that’s the feedback we’ve been hearing. And and, and so when we look, when we look across the market, and the current offers, off the back of these next generation income protection products that have been released by all of the insurers around the country, we can see that different insurers have adopted and have indeed taken different risk appetites as they’ve approached the release of these or as they, as they have designed their new product constructs in line with these APRA measures.

Fraser Jack
Yeah. Now, you mentioned wreaked havoc on but also wreaked havoc on the relationships between, you know, advisors and clients, advisors and insurers and clients and insurance, didn’t it sort of that that whole trusted relationship that was there as almost is always, you know, Bill shocks are a great one to put strain on those relationships.

Benjamin Martin
Yeah, and look, I mean, everyone, it’s that element of surprise, that we just want to that we just want to get rid of it, particularly when it comes to an insurance policy. And when we know the private health premiums have been increased year on year, and when you’ve got an IP policy statement coming through, or advising of an ad hoc rate rise that just compounds any cash flow pressures that might obviously be prevailing within that particular family budget.

Fraser Jack
So when it comes to the the old products, it’s fair to say that a lot of them were fairly similar, because are all competing, you know, in that space, as you mentioned, that arms race with the new products are all very different. Do you think that that’s there’s a possibility that those new products will sort of come together in a way in the, you know, force under that sustainability? Banner?

Benjamin Martin
Well, that’s the look, that’s the million dollar question. phrase, I don’t know if I can be honest with you. Because what we’re what we’re seeing across the spectrum or across them, if we if we if we if we take if we pause for one moment, and scan the current market, and have a look at the current offers available for to new business for our clients, we can see that there’s lots of variation Fraser amongst the product designs, the product designs across all insurers. So at one end, at the extreme end, we’ve got products that have been built, that, let’s say aren’t within the spirits of the APRA measures, and indeed the actuaries Institute reference product and recommendations that have been prescribed by the actuaries Institute, that’s at the extreme end, at the other end, or perhaps at the midpoint, we’ve got a whole bunch of products that have been designed in line with the APRA measures and the actuaries Institute, that are fundamentally being constructed with one aim. Right. And that aim, of course, is to address the root cause of why we’re having this discussion in the first place, and to build products that manage long term claims, and have effective controls in place to manage and keep these products fundamentally sustainable moving forward. And so Fraser, one of the things that we were really keen to, I guess, to unpack, and to see is whether we end up seeing some type of sustainability scoring system that will be released to the market that will provide meaningful, meaningful content in Intel, for our advisors, when they’re looking at recommending a particular next generation income protection product. Because as I was alluding to earlier, it can be difficult to, to apply that tangible piece to that whole sustainability narrative. And that’s why something like a sustainability scoring system, I think, is going to be a very helpful tool to advisors and licensees. To the extent that they’re scanning the market, assessing which income protection product to recommend to their client, especially if their underlying philosophy requires and warrants a product that is fundamentally in the best interest of the clients and built in a sustainable manner. Moving forward,

Fraser Jack
you know, that a lot of talking sustainability around investing in, you know, in long term is probably something that probably should also be discussed when it comes to, you know, long term long term insurance products,

Benjamin Martin
if I can add their phrase, I think the big one too, with sustainability, is that what we’re talking about here, if we put this into practice, right, is if I’m recommending a next generation IP contract that is, let’s say, at a higher risk of being susceptible to ongoing pricing volatility once the contract goes in force. And perhaps that’s because the controls that are built been built into that contract aren’t as robust to manage long term claims, then to what extent is that actually in my clients best interest for them to subscribe to one of those products, because when you think about it, whenever advisors would know well into advisors would be voluntarily across this. But in the past, if there have been pricing pressures prevailing within a particular life insurance contract, there may have been a tendency to review that existing product and look to replace it with a suitable product in light of the client’s needs and objectives that may have ultimately aligned with their needs and circumstances and objectives. But at the same time, providing some, some pricing, some alleviated the client of any pricing pressures that may provide in that existing contract in the new world, if if my client is in one of these contracts that is perhaps more susceptible to pricing pressures moving forward. And the million dollar question is, if I have to replace that contract 2345 years down the track? To what extent am I going to run into difficulties replacing that product at that point in time, especially if that client’s medical condition has subsequently worsened three or four years down the track? And if the medical condition of the client has subsequently worsened? How is that going to complicate the replacement product process that might be via extra underwriting? Medical exclusions loadings, and a minor might not even a convener might not be able to jump the underwriting hurdles in the first place, given their underlying medical conditions? So that’s the risk we run, Fraser, I guess is what I’m trying to say here is that if I am popping a client into one of those more extreme income protection policies that perhaps isn’t hasn’t been designed within the fundamental spirit of these measures. To what extent is that not in my client’s best interest, if I can foresee future health challenges that might be on the horizon for that particular client?

Fraser Jack
You mentioned, the sustainable scoring system. And obviously, some of the scoring system we’ve used in the past, apart from understanding and knowing your product has been software that rates, product features and benefits also, against the price? Or the premium, I should say, but how can we get that sustainability type scoring into those products? And I guess that’s probably way down the track, but or to just for now, understand it from an from an advice point of view to be able to have that sustainability overlay?

Benjamin Martin
Yeah. So I think the thinking, the thinking behind the scoring system is to have a look at so an independent or third party will run the assessment. They’ll look at a particular they’ll look at the particular terms and conditions within a product construct. And I’ll look at the various controls that have been built into that contract. Now, based on an A bounced assessment of each and every control, a determination will be made as to what extent do those controls manage that long term client experience? And therefore, to what extent is it classified as being sustainable or not?

Fraser Jack
So I guess, I guess like anything, it’s probably going to wash out over the next few years and we’re not really going to be able to say right Now,

Benjamin Martin
hopefully, hopefully it happens sooner rather than later, Fraser, but on a first principles basis, what we would encourage the advisors to do is to have a look at the policy and the contract in its entirety. Lift up the hood, whether that’s by way of trolling through the various Irish reports that assesses and shines and applies scrutiny to the underlying features of the contract, and make a balanced assessment in conjunction with your licensing compliance officers as to whether or not that product has been built in line and within the spirit of these APA measures. Because as a starting point, that’s gonna give you a good sense of, you know, to the extent to which that product is sustainable moving forward.

Fraser Jack
Wonderful. Ben, thanks so much for coming on this particular episode. We look forward to unpacking what you just said there a little bit more in the next episode when we get where we dive into the concept around critical thinking and mindset of the advisor.

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