Insurance: How we score insurance policies

We've had quite a bit of feedback from those wanting more information on how interest.co.nz went about scoring insurance products. We have provided a scoring guide on the website and you can find the explanation for Travel, House, Contents and Car insurance respectively by clicking on each of these.

All scoring followed the same overall methodology; simply, the better the scope of cover under the policy then the higher the score that resulted. Scoring of products is a means of fairly comparing one to another. The initial step is to identify all the products in the market, each of these are reviewed, and a list of all product features compiled. A product feature is an aspect of the policy coverage. For car insurance, windscreen cover would be a policy feature. Once every product has been reviewed we then look at this list of features and tighten it up slightly using expert industry guidance. With Contents insurance we started with a list of over 20 products which produced a list of about 120 policy features. Our final assessment was based 94 relevant features. Each of these features was weighted based on its importance in regard to likelihood of claim. For example, the 'unoccupancy clause' is a feature in every product and scores differently based on the terms offered. A policy with a 30 day clause will score less than one with 60 days and the highest score will go to 90 days or more. The weighting of each feature determines the value applied. Providing 'accidental death cover' as a feature under House or Contents insurance is, we believe, largely irrelevant to the general cover and therefore attracts a very low weight. In contrast, providing a broad description of what items will be replaced under Contents (compared to cover for market-value) is worthy of scoring much higher.

In our comparisons the highest scoring Contents offering was Ansvar's Omega policy at 82%. This means they scored the highest in total features compared to all other products reviewed. To get near the maximum points would be very difficult as an insurer would need to offer every possible feature in the market, with the best conditions in the market. Using the above Ansvar's case as an example, what kept their score from being even higher were things like;  'personal effects' cover being limited to NZ, Pacific Island and Australia, 'liability cover' with only a $1 mil. limit, and several features where limits of cover were regarded as lower than best-in-market and therefore did not receive the maximum available points. The lowest ranking product was AA Insurance's 'defined events' Contents policy. This scored low due to the limited nature of the cover (no accidental damage), and the general low level of limits in the policy. The other AA Insurance Contents policy with Accidental Damage scored 18 points higher, reflecting the weighting we apply for accidental damage cover. Our scoring process is an intricate one and probably the most extensive means of comparisons available in the New Zealand market place. Insurers pay several thousand dollars for access to other comparative competitor data that is similar to what we now provide free on this site. In fact, ours may be technically better. We have entered into direct on-on-one discussions with a number of insurers about the nature of our scoring processes, as a way to ensure a fair and accurate result for readers. These processes involve much detail, and we work hard to ensure we get it right.

One area we are not able to capture in the scores assigned is the question of customer service and the ease of settling claims. We accept that some companies provide excellent service in this area, but we currently have no way to measure this, even though it is a key benefit (or disadvantage, as the case may be). We also acknowledge that many companies interpretations of their policies is not as strict as the wording may suggest. While that stance may benefit some of their customers, we would rather see the policy wording reflect the company's actual practice at the time of a loss. It is also worth noting that there are features we have found that are 'great value for money'. An illustration of this is NZI 'sustainability cover' for replacing whiteware with more energy efficient items, and AMI's replacement cover with no age limit on items. You should not buy any insurance based solely on price - you pay money for cover, and our scoring will assist you in figuring out what is the best balance for you between 'cover' and 'price'.