By ROB STOCK
Sovereign shouldn't really be called a life insurance company, says chief executive Symon Brewis-Weston.
"We pay $300 million in claims each year. Seventy-five per cent are for living insurance," he said.
By living insurance he means income protection and cover for trauma, disability and medical - the kinds of insurances that provide money and options in cases where policyholders' lives are interrupted by serious accident or ill-health.
Figuring largest among the living insurance costs are claims for mental health and cancer, he said.
In the last few years insurance watchers have felt that Sovereign's own health was in need of improvement. Brewis-Weston was brought from Australia, where he was general manager of corporate finance at Sovereign's sibling firm Commonwealth Bank of Australia.
He's made some big changes during his one-year tenure to date, including big changes in the executive team, because he felt Sovereign, like the life insurance industry in general, was failing to find ways to make insurance cheaper and easier to buy.
"The cost to produce is too high and as an industry we have to become far more aggressive on how we manage cost," Brewis-Weston said.
These days a family's insurance needs, including house, contents and car as well as personal insurances like life, trauma, and income protection, can easily cost over $4000 to $4500 annually.
Innovations in the pipeline include a simple form of life insurance being sold by its parent company, ASB.
There will be a bigger focus on selling health insurance. The company plans to raise its profile in that arena with medical bracelets called "Save my Life", which can be scanned by a mobile phone if their wearer is unconscious to provide life-saving information, such as whether the wearer is allergic to penicillin.
Tougher cost management was necessary in medical insurance as premiums are rising, thanks to a growing number of claims and increasing costs of medical treatments like surgery.
"Claims inflation is 8 to 9 per cent. That's just totally unsustainable," Brewis-Weston said.
Insurers have work to do to manage their interaction with private healthcare providers.
Quotes for the same procedure can vary by a factor of three, he said. "I get the sense there are those who think ‘the insurance company is paying. We will see what we can get out of them'."
The search for growth will also make Sovereign more capable of operating in an increasingly-fragmented sales market.
Sovereign has traditionally relied heavily on sales through advisers, both through the curiously-named Sovnet as well as true independents, and since its purchase by ASB in 1999, the bank.
"In the late 1990s there was pretty much only advisers. Then the banks came in. Roll forward you have got corporates getting into it. You have got the TradeMe and KiwiCover."
That fragmentation will only increase in pace, he said.
People have more choices about where they buy their insurance, including online.
That's going to require differently-packaged insurance, probably more "modular" in feel, where people can bolt cover onto a base to suit their needs, and their increasingly strained wallets, Brewis-Weston said.
The new norm means also accepting that customers won't opt to cover as much risk as a life company might like, but Brewis-Weston is philosophical about that.
Some challenges for insurers stay the same, Brewis-Weston reckons, including that human nature is optimistic, which leads people to underestimate risk, and hence be less likely to buy insurance to cover it. "Ask people and they will say there's a 10 per cent chance of getting cancer. Tell them it's a 30 per cent chance and ask them again, and they'll say it is 11 per cent."
Source Fairfax NZ News
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