The results of theMoney ManagementRating the Risk Raters survey showed risk companies were concerned about researcher subjectivity, transparency and how quickly product upgrades appeared on their systems.
However, research houses have their own take, claiming risk research is inherently subjective to start with, that they are open and transparent, and that upgrade times are often hindered by risk companies themselves.
Gary Douglas, general manager ofBOSS Software, a business that delivers risk product research and ratings to advisers through its software system, says it cannot help but be subjective.
“In financial planning, much of the product research is non-subjective, as it is based largely on quantitative data like past performance figures that are easy to benchmark against each other,” Douglas says.
“With insurance products you are dealing with an intangible. You are looking at a policy document and assessing the future potential for a claim — for a comparison you are totally reliant on the wording,” he says.
Douglas says research houses look at the definitions included within policy documents to establish if they are more or less favourable to consumers who might submit a claim in future.
“There is no doubt there is some subjectivity. We might have 14 policy documents in front of us, and we will have to divide them up into categories based on certain criteria,” he says.
Douglas says the reliance on policy document wording is essential because companies may say they process claims in a certain way, but as this may change over time, the consumer can only rely on wording.
Though risk companies voiced concerns about transparency, Douglas says BOSS is very clear about the process it goes through to establish ratings and often talks this through with them.
“Often a company will say they don’t understand why they have received a rating and we will arrange a meeting with our researchers to talk about the issue,” he says.
Douglas says the ratings methodology is fully outlined within the system for subscribers, and life companies are always asked to verify their factual information and told how they will be rated.
Investment Data Technologies(IDT) researcher Doug Scriven says the ratings they produce are always open to enquiry from life companies and they often go so far as helping to develop these products.
Douglas says while some risk companies complain about the speed at which their product upgrades are included on systems, it is often their inability to supply material on time that is the cause.
He says BOSS has an agreed timeframe of four to six weeks for risk companies to provide all relevant material about an upgrade, allowing the researcher time to process things like premiums and ratings.
“What usually happens is they get delayed printing things like brochures and policy documents, and if they don’t get them printed and delivered then they can’t get a current rating on the system in time,” he says.
Scriven says IDT issues product releases as required rather than to a monthly deadline, so that the company responds to changes in the market on time.
Though these were the main concerns risk insurance companies had about researchers in theMoney Managementsurvey, it seems researchers have their own concerns about risk companies.
That risk product producers will not supply information on the number of anticipated claims against their policies is a problem, according to Scriven, as it does not allow researchers to account for the likelihood that their premiums may be adjusted upward in the future.
Another criticism Scriven makes is that many advisers are not using research systems as an inherent part of their business process and policy recommendation, but are instead using them as ready reference tools.
He says this means risk companies often specifically design products to become defaults within the research system, so that advisers will be more likely to recommend them instead of doing more thorough research.
Scriven says one concern over the relationship between life companies and their researchers is that researchers often push for policy document definitions that allow for a more generous amount of potential claims, and while this may seem helpful to the consumer, it actually serves to push premiums up.
“If research houses continue to push the envelope and don’t consider people paying premiums for the term of their natural lives, they’ll reach a point where they can’t pay it any more,” he says.
