EAA/Sunstate - AIPA?
Nunc est bibendum
Thanks Di Vosh. You're not the first person to suggest that in recent days. If only we had a choice of which EAA reps to vote for! (Hint, Hint, more EAA AIPA members desired so that they can have a say).
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MBF
If I may just shoot one perception down here, MBF is NOT the best product out there (my opinion only of course). Here's why:
For starters, the MBF is not insurance and therefore users do not have the protection of Australian insurance law. If you read the AAPMBF rules you will see this stated quite clearly fairly early on in the document. From what I can see the MBF is what is known as a discretionary mutual fund (DMF), the key ingredient of which is that payments of claims are discretionary. As soon as a member has a right to a claim then the product becomes insurance and the AAPMBF is required to adhere to Australian insurance law. So to say that the MBF is the best product is in fact a little misleading. It is the only product in this space that's out there, so you could also say that it is the worst product!
There are pros and cons to this arrangement: Although the AAPMBF rules state the conditions upon which a claim (as well as the 20 year payment) will be paid, the discretionary nature of payments means members have little legal recourse in the event of a dispute. In contrast, when an insured makes a claim via their insurance company, they have the benefit of Australian insurance law which worldwide is considered the most consumer friendly there is.
The pro to the DMF arrangement though is that what I will call "frictional" costs of operating such an entity are far less than a normal insurance company, and thus members get more bang for their buck. An insurance company has to carry a certain amount and quality of capital (e.g. government bonds versus futures or other "risky" derivative products), and they also have far more stringent reporting requirements to regulatory authorities which leads to higher overheads and red tape. DMFs on the other hand are not bound by these constraints quite so much. In recent years the reporting requirements have increased somewhat, but it is still nothing compared to an insurer. I suspect this is a large reason, as well as a dearth of claims, why the MBF is feeling so flush with funds...
Given that disputes over claims with the MBF appear to be quite rare, is any of this really a big deal? Arguably not, but for my money I am happier dealing with insurers who come under Australian insurance law. There have been numerous examples of DMFs that were once sailing along nicely only to be decimated for what would appear to be remote reasons and I would hate to be one of those who ends up on the raw end of that deal.
Personally, I have not gone with the MBF because frankly there are better income protection products out there anyway! $550,000 is a pretty measly amount for a start. The insurance I have gone with pays up to $2 million, and although it is not in one lump sum I would prefer it this way as it makes tax far easier, and is more in line with my needs anyway. Furthermore the flexibility of these insurance products is greater than the MBF in that you can adjust excesses and numerous other details far more easily than you can with the MBF, leading to a product that is customised to your needs.
All of that said, I shall reiterate that this is my opinion only, and all respect to those who are part of the MBF. In many ways it is a good product, but it doesn't take much looking around to see that there are many very good options around, and those options only seem to be increasing.
For starters, the MBF is not insurance and therefore users do not have the protection of Australian insurance law. If you read the AAPMBF rules you will see this stated quite clearly fairly early on in the document. From what I can see the MBF is what is known as a discretionary mutual fund (DMF), the key ingredient of which is that payments of claims are discretionary. As soon as a member has a right to a claim then the product becomes insurance and the AAPMBF is required to adhere to Australian insurance law. So to say that the MBF is the best product is in fact a little misleading. It is the only product in this space that's out there, so you could also say that it is the worst product!
There are pros and cons to this arrangement: Although the AAPMBF rules state the conditions upon which a claim (as well as the 20 year payment) will be paid, the discretionary nature of payments means members have little legal recourse in the event of a dispute. In contrast, when an insured makes a claim via their insurance company, they have the benefit of Australian insurance law which worldwide is considered the most consumer friendly there is.
The pro to the DMF arrangement though is that what I will call "frictional" costs of operating such an entity are far less than a normal insurance company, and thus members get more bang for their buck. An insurance company has to carry a certain amount and quality of capital (e.g. government bonds versus futures or other "risky" derivative products), and they also have far more stringent reporting requirements to regulatory authorities which leads to higher overheads and red tape. DMFs on the other hand are not bound by these constraints quite so much. In recent years the reporting requirements have increased somewhat, but it is still nothing compared to an insurer. I suspect this is a large reason, as well as a dearth of claims, why the MBF is feeling so flush with funds...
Given that disputes over claims with the MBF appear to be quite rare, is any of this really a big deal? Arguably not, but for my money I am happier dealing with insurers who come under Australian insurance law. There have been numerous examples of DMFs that were once sailing along nicely only to be decimated for what would appear to be remote reasons and I would hate to be one of those who ends up on the raw end of that deal.
Personally, I have not gone with the MBF because frankly there are better income protection products out there anyway! $550,000 is a pretty measly amount for a start. The insurance I have gone with pays up to $2 million, and although it is not in one lump sum I would prefer it this way as it makes tax far easier, and is more in line with my needs anyway. Furthermore the flexibility of these insurance products is greater than the MBF in that you can adjust excesses and numerous other details far more easily than you can with the MBF, leading to a product that is customised to your needs.
All of that said, I shall reiterate that this is my opinion only, and all respect to those who are part of the MBF. In many ways it is a good product, but it doesn't take much looking around to see that there are many very good options around, and those options only seem to be increasing.
Last edited by Gen. Anaesthetic; 7th Nov 2010 at 08:25.
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Gen,
Just as Biatch has you make a big deal about discretion when referring to rules of the MBF so kindly tell us when that discretion has been used to refuse a payment of any sort to any member that was entitled to that payment under the rules of the Fund. We shall deal with the rest of your post then.
Just as Biatch has you make a big deal about discretion when referring to rules of the MBF so kindly tell us when that discretion has been used to refuse a payment of any sort to any member that was entitled to that payment under the rules of the Fund. We shall deal with the rest of your post then.
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Gee Bolter you are pretty sensitive about this. I think you can see that my post was not an attack on the MBF. I never made any assertion that the MBF has not paid a member. All I was attempting to do was shed some light on reality. Clearly you have presented the case that few if any claims have not been paid so that's great. I just thought it reasonable that people understand the full picture. As I said, I actually think the MBF is a pretty good product.
But, to answer your question, how the hell would I know?? I am not a member of the MBF and have not been around long enough to see what has taken place. Furthermore I am sure any non payment is not something the MBF is going to advertise! The point is, the very nature of the MBF requires it to be discretionary in the way it pays out its claims. In fact there have been numerous situations where a court has deemed a body like the MBF to be an insurer - and therefore subject to Australian insurance law - simply by virtue of the pattern of payments it makes to its members. Consequently DMFs do play a somewhat dangerous game at times and this is what can bring them unstuck. That being said, from all reports the financial state of the MBF is extraordinarily sound so there is probably nothing to be concerned about, as well as the fact that the trigger for a claim is usually going to be far simpler than that for many other insurers or DMFs. This to me means that the MBF is less likely to get into trouble than your average DMF.
But, to answer your question, how the hell would I know?? I am not a member of the MBF and have not been around long enough to see what has taken place. Furthermore I am sure any non payment is not something the MBF is going to advertise! The point is, the very nature of the MBF requires it to be discretionary in the way it pays out its claims. In fact there have been numerous situations where a court has deemed a body like the MBF to be an insurer - and therefore subject to Australian insurance law - simply by virtue of the pattern of payments it makes to its members. Consequently DMFs do play a somewhat dangerous game at times and this is what can bring them unstuck. That being said, from all reports the financial state of the MBF is extraordinarily sound so there is probably nothing to be concerned about, as well as the fact that the trigger for a claim is usually going to be far simpler than that for many other insurers or DMFs. This to me means that the MBF is less likely to get into trouble than your average DMF.
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Gen,
When you mention the discretionary nature of the MBF you paint the picture that they only make payments if they feel like it, this is not the case, in reality they are obliged to make payments in accordance with the rules. There is a dispute resolution rule should the need arise, again you fail to mention this. When it comes to escape clauses your insurance policy probably has more than Jack Rice could jump over. They invented them didn't they???
You admit to not being a member and yet proffer that one reason that the MBF is in such a sound financial position is a dearth of claims, how do you know exactly how many claims they have had and what the total value of those claims are???
Your insurance company is there for only one reason, to make money and lots of it. Get yourself a copy of the rules and read for yourself why the MBF exists. (It is only a few lines " Objects").
When you mention the discretionary nature of the MBF you paint the picture that they only make payments if they feel like it, this is not the case, in reality they are obliged to make payments in accordance with the rules. There is a dispute resolution rule should the need arise, again you fail to mention this. When it comes to escape clauses your insurance policy probably has more than Jack Rice could jump over. They invented them didn't they???
You admit to not being a member and yet proffer that one reason that the MBF is in such a sound financial position is a dearth of claims, how do you know exactly how many claims they have had and what the total value of those claims are???
Your insurance company is there for only one reason, to make money and lots of it. Get yourself a copy of the rules and read for yourself why the MBF exists. (It is only a few lines " Objects").
