Building a recommendation – remember to substantiate your data assumptions
What data is most commonly used in insurance portfolio modelling? For us the key data elements and their associated sources are as follows:
- Taxation brackets
- Social welfare benefit levels
- Funeral costs
- Age-adjusted life expectancy
- Age of independence, retirement, and of loss of independence
- Childcare costs
- Savings rates
- Appropriate discount rates
- Income inflation
- Cost price inflation, both current and expected
- Expected return on investment
These are for the most part readily available on a quarterly basis and at worst, at least annually. Go grab them and use them to update your recommendations. Here are some of the favourite sources for the information above:
Inland revenue has a calculator, of course, for personal tax rates. If you need to talk personal tax, then referring to the IRD’s calculator is going to keep you on the side of the angels. https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals
For most working clients if one of them is sick or disabled, payments can be very low or non-existent. Simply showing the level of assistance can be a powerful tool to demonstrate the value of insurance. You may like this site: https://check.msd.govt.nz/
What about when people retire? Of course, you may want to use your client’s goal, but either way, this article is a great resource: https://www.stuff.co.nz/business/money/124601147/never-or-as-soon-as-possible-when-is-the-optimum-age-to-retire
What would childcare cost? Another scary number that many parents are already familiar with – but what if you need to show a client who hasn’t entered the difficult world of time to work versus cost of care trade-offs? Then try this site: https://oece.nz/public/information/fees/childcare-fees-costs/
For funeral costs the citizens advice bureau has a good site with details. https://www.cab.org.nz/article/KB00000623
Financial facts and data are best sourced from the Reserve Bank of New Zealand to lend a gold-plated seal to your assumptions. https://www.rbnz.govt.nz/ The landing page gives you two of the most important pieces of data, then the Key Statistics section will help you with the rest.
W K