Introduction
Risk research and ratings are conducted to allow advisers and their clients to discern the relative
strengths and weaknesses of life insurance products to help choose products that best meet the
needs of the client.
Life insurance products are by nature complicated and complex. Omnium methodology takes into
account all the intricacies whilst allowing client needs to be accurately considered and therefore
reflected in the final score.
This document is designed as an overview of how the Omnium research is gathered and
reflected in product scores.
Covered Needs
Life insurance products are designed to provide financial support should an insurable event occur.
These insurable events are called “Covered Needs” in Omnium. Omnium research and premiums cover the following seven main client need areas which are satisfied by life insurance products.
These are:
- Life Cover – which provides a payout to a surviving party on the death of the life insured.
This is sometimes also known as Term Cover. - Total and Permanent Disability Cover (TPD) – this provides a lump sum to a person should they become permanently incapacitated.
- Trauma Cover – provides a lump sum to assist in recovery and lifestyle changes on serious medical traumas such as cancer or heart problems.
- Income Protection Cover – provides regular payments to the client to replace salary for a
specified period on temporary disability and incapacity to work in normal employment. - Business Expense Cover – provides regular payments to allow a business to pay expenses usually for a short period when a key business person is disabled and unable to work in normal employment.
- Child Trauma Cover – provides lump sum cover for a child to assist in recovery and lifestyle changes on serious medical traumas.
- Needle Stick Cover – provides a lump sum benefit if a medical professional becomes infected with HIV, Hepatitis B, or Hepatitis C as a result of an accident occurring during the course of work.
The above areas are designated as “Cover Types”. Life insurance products satisfy needs in one or more of the above cover types. Research is provided in all of the cover types as well as in common areas which apply to all cover types such as insurance company strength, whether level premiums are available if benefit indexation is possible etc.
Categories of Research Data Provided
To compare insurance products, information about them is categorized into “Features” or categories that exist across products in the market. There are currently more than 260 Features being researched. The Features are constantly being reviewed in line with industry trends and new products in the marketplace. Whenever a new benefit is provided by more than one insurance company Omnium will create a new Feature to add to the research and score across the market.
Omnium provides the following material to help with product selection for each Feature:
- Disclosure Text – Provides a summary of textual information usually obtained from the life insurance provider’s product disclosure statement and/or policy documents.
This text forms the basis of all the other Feature data. - Feature Score – A rating given by Omnium of the relative strength of the feature when compared to the rest of the market. The score is available in a variety of formats:
- A raw number between 0 and 100
- A rating from E to A (5 values)
- A rating from E- to A+ (15 values)
- A five-star rating with half-star units.
Scoring is conducted in a highly statistical way based on the median and the maximum of the benefits across the market. There are currently more than 230 scored Features.
- Simple Feature – Simply a “Yes” or “No” indicating if the feature is available in some form.
This allows assisted product selection where certain benefits can be chosen as mandatory and a list of all products providing them can be returned. There are currently more than 160
“simple” Features. - Sub Features – Features are composed of sub-features that all contribute to describing the total feature properties. For example, the Funeral benefit has a sub-feature of “The maximum available payout” as a sub-feature. There are currently more than 1100 sub-features with more than 690 being scored.
- Strengths, Limitations, and Commentary – A summary of the strengths and limitations of the feature is available along with commentary. This is composed of the relevant sub-features to provide a description of the core sub-features for each feature.
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Constructing Product Feature Scores
The feature score for a product is constructed using the following methodology: -
- The individual sub-feature is scored based upon its value compared with the median and maximum values in the market. If the sub-feature doesn’t have an obvious numeric value, it is given a score based on a points system. The entire Omnium research product set is used at this stage, regardless of the Approved Product List (APL) being applied by the user. There are currently more than 690 scored sub-features.
- Each of the above sub-scores is normalized so that they range from 0 to 100.
- The score for a feature is calculated by combining all its sub-feature scores in a weighted fashion according to importance. There are currently more than 230 scored features.
- Each of these is again normalized so that they range from 0 to 100.
- The score for a Cover Type combines the feature scores for that Cover Type according to one of 3 different sets of Omnium weightings that can be changed by the user:-
Essential – This heavily weights core features that are most important.
Balanced – This more evenly applies both essential and ancillary benefits and criteria.
Comprehensive – This more heavily weights ancillary benefits and criteria.
Each individual score weighting is one of the Fibonacci numbers to ensure real-world
values and not arbitrary unrealistic importance to particular features. The weighting must be one of the following Fibonacci sequences, 0, 1, 2, 3, 5, 8, etc.
There are currently up to 8 possible Cover Types for a product. These are the 7 Covered
Needs described above, plus the common area that includes insurance company strength
values and other features common to all products. - Combining the scores across cover types to get the total product score is done in two possible ways.
a) If research is being done without premiums, the scores are averaged across each possible supported cover type equally.
b) If premiums have been calculated for the products, the scores are weighted by premium. So a higher premium cost for Trauma will give more weight to the Trauma feature score and any cover types not being used by the product don’t contribute to the product score. The policy fee is excluded from this weighting as it doesn’t apply to any particular cover type. - The final Product score is then normalized across all products in the APL so that there will always be at least one product within the cover type combination that will have a raw score of 100 out of 100.
Premium and Combined Scores
After premiums are calculated there exists the added complication that not all of the cover types that the product is capable of supporting are now being utilized. In order not to score the product’s features according to cover types that are not wanted we need to remove unused cover type scores from the final product score. To do this we re-evaluate the product score using the exact same procedure as described in “Constructing Product Feature Scores” except without any unused cover types. For example, a product supporting Life, TPD, and Trauma and which rates well because of its Trauma score may not rate well when the client is not buying Trauma.
The Premium score is assessed based on the cheapest price within each of the cover type combinations scoring 100. Other products with the same cover type will have a Premium score of 100 * cheapest premium/premium. For example, a premium costing 10% more than the cheapest premium will score 90.
The Combined Score is determined by the average of the Feature and Premium scores. The averaging is done according to the adviser’s preference. This can be done in a range from entirely based on Features to entirely based on Premium. The calculation of the Combined Score is done for each included Cover Type separately and then combined over all the Cover Types weighted by price. Using this weighted average allows the higher-priced Cover Types to have a higher weight on the feature scores of components that cost the most. For example, a product where the trauma costs twice the cost of TPD should weigh the trauma feature scores twice as important. In this process, the policy fee is excluded from the calculation since there is no Cover Type feature score related to fees and some products can have a zero fee.
Constructing Portfolio Scores
Portfolios are constructed by combining several products for a Life Insurance company to meet all
the required needs of the quote.
The Portfolio is constructed using the Omnium product preference order with user choice of either Standard/Intermediate or Plus product selection. Plus will choose the products with better benefits first if possible.
Scoring in this situation is achieved by adding together all the Product scores of the products which are used in the Portfolio and weighting by the price of products used. Each product score is calculated using the previously described methodology.
The Combined Portfolio score includes the Price score where the price is the total Portfolio price of solutions that meet all the required needs. These prices may use multi-product discounting as well, as have reduced policy fees where the company allows.
The features score for every product is based upon the entire product range for the covered needs, not just the products that are found to have premiums for the selected options. Within the Portfolio the score is combined, weighted by product price, over the scores from each of the products used to create the portfolio.
The combined score averages the feature and price scores. Price scores give 100 to the cheapest
portfolio and 50 to a portfolio with twice the cheapest price.
Legacy Product Scores
Omnium has legacy product research dating back to 2003. Legacy research can be conducted by selecting a number of products over a time period from 2003 up to and including current products.
Scoring is done by dynamically comparing the features across all the chosen products. Using a similar methodology to what has been described previously. We need to score dynamically since we don’t have a base on which to compare. For example, we can’t use the current products as a base since some features may even have been superior in the past and we can’t have scores exceeding 100. Please note that because we are scoring dynamically across the chosen products, the scores will vary according to what products have been chosen to compare.
Portfolio Premium Modelling
Portfolio multi-policy premiums
The portfolio premium adds up the premiums for the individual products and then factors in the multiple policy discounts as well as reduced policy fees that each insurance company offers.
For example, if you choose to quote for Life and Income Protection, the portfolio premium for each company will add the premium for the Life policy with the Income Protection policy, and then factor in the multiple policy discount rule for each insurance company. This way you will obtain an accurate quote without having to amend it when you are in the insurer quotation tool.
How Omnium chooses products to put in the Portfolio
Each insurance company has a few different versions of its products. For example a standard
Income Protection product and then a Premier or Ultimate product.
When choosing products to create a Portfolio, we allow you to choose if you want the best or the least expensive Trauma or Income Protection products in the Portfolio. Please be aware that the best or least expensive product within the insurance company may not be available for your client or the options you have used. The modeling will just try and create the portfolio in your specified
order.
The products used to construct the Portfolio can be seen by looking at the Portfolio details.
This automatic product selection can be manually overridden by the adviser for any individual
portfolio through an interface that allows products to be manually selected to meet each required
cover type need.
Interactive Personal Scoring
Omnium adjusts research scoring interactively based on client requirements. Based on the “know your client” principle the scores can be adjusted to compare only the products and options required and available to the client. Using every relevant knowledge about the client such as required needs and demographic situation, the research can be tailored to present only the appropriate features for research assessment.
The needs of the client vary from person to person so the “best product” will vary continuously.
Omnium has devised a scoring methodology that reflects the client’s requirements and that improves accuracy the more it knows about the client. We call this “Interactive Personal Scoring”
When nothing is known about the client the score being provided is an “Anonymous Score”.
- Once the age and gender are known, features not applicable can be removed from the scoring process. For example, products the client is not eligible for can be disregarded in the scoring process since they have no relevance to that specific client. Likewise, once we know the client's gender, the appropriate male or female trauma definitions are removed from the scoring process.
- Once the occupation is known, ineligible products can be removed, and features only available to other occupation classes can be removed from the scoring process.
- Once the client’s requirement for a specific feature such as buyback, double TPD, Trauma reinstatement, accident benefit option, etc are known but not desired by the client, the scores relating to those features can be removed from the scoring process.
Thus, the more that is known about the client and their needs, the more we can provide specific advice relevant to the client that can help in selecting their best products. Any disabled feature criteria based on interactive personal scoring are dimmed in the research reports.