In our April Referral Partner update we provided news about how we have been making our risk advice discussions more robust and thorough.
This was not only to meet increased regulatory requirements but because we have always been committed to taking the time to dig a little deeper, to fully understand our clients’ individual situations, to ensure we are providing them with the best advice to meet those circumstances.
Regulators are ramping up efforts to make this kind of attention to detail the norm for our sector.
The Hayne Royal Commission has lit a fire under both, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA), with both agencies seemingly keen to demonstrate they have increased the intensity of scrutiny right across the financial services sector.
The Federal Government and both agencies’ recent actions and public utterances have featured much “sabre rattling” as they ratchet up the pressure on the sector to adopt higher standards of behaviour and practice.
Recent examples include:
APRA’s, 2 May 2019, letter to insurers calling on the life insurance industry to urgently address concerns about the sustainability of individual disability income insurance
ASIC’s banning of several financial advisers in April and conduct of criminal charges against others through April and May
APRA’s 29 March launch of its inaugural Life Insurance Claims and Disputes Statistics
ASIC’s 29 March launch on the MoneySmart website of its life insurance claims comparison tool for consumers
the annual address by ASIC Chair, James Shipton, titled The fairness imperative, delivered at the AFR Banking and Wealth Summit, on 27 March 2019
the speech by ASIC Commissioner, Sean Hughes, delivered at the 2019 Annual Superannuation Law Conference, on 8 March 2019
The Federal Government’s passing into law of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019 on 5 April 2019, granting APRA with significantly boosted powers to act against superannuation funds
APRA’s media release welcoming the above development, saying it will help it “weed out underperforming funds”; and
APRA’s publication, on 16 April 2019, of its new Enforcement Approach, detailing how it will use its enforcement powers to prevent and address serious prudential risks and hold entities and individuals to account, which APRA Chair, Wayne Byres, characterised as “adopting a ‘constructively tough’ appetite to enforcement”
As if all these actions don’t make it abundantly clear the whole industry has to up its game, if you are in the advice sector, it is perhaps wise to take some time to familiarise yourself with The Financial Adviser Standards and Ethics Authority’s (FASEA) Code of Ethics, released in February 2019.
The Code of ethics comes into effect from 1 January 2020 and is “designed to encourage higher standards of behaviour and professionalism in the financial services industry.”
The level of thoroughness the Code requires when advising and also questioning clients during our advice process underscores the importance of the work AFRM has been doing to ensure we always “go the extra mile” to ensure we understand our clients’ individual circumstances to ensure we have helped them in every way we can.
For example, according to the Code’s official Explanatory Statement, Standard 2 of the Code: “requires, as an ethical duty, that you act with integrity. It also requires you to act in the best interests of each client.”
Further expanding upon expectations on advisers, Clauses 31 to 33 of the Explanatory Statement state:
The ethical duty in Standard 2 to act with integrity is a broad ethical obligation. It is based on a more professional relationship between the relevant provider and the client, where the relevant provider has a duty to look more widely at what the client’s interests are.
This means that you will need to work out—and, if necessary, help the client to work out—what the client’s objectives, financial situation, needs, interests (including long-term interests), current circumstances and likely future circumstances are. To comply with the ethical duty, it will not be enough for you to limit your inquiries to the information provided by the client; you will need to inquire more widely into the client’s circumstances.
You are not relieved of the ethical duty merely because the client does not provide enough information, even when asked.
At AFRM, we could not agree more. As mentioned at the outset, our philosophy has always been to fully understand our clients’ individual situations to ensure we are providing them with the most appropriate advice.
We do this to ensure the best possible claims outcomes, when the time comes that one of our clients needs to make a claim.
Please take a moment to read the Case Study below which illustrates how taking the time to dig a little deeper can change your clients’ lives for the better.
Until next time, live your life well!
Sincerely,
Nicholas Hatherly
Managing Director AFRM
Case Study
This case study comes from AFRM’s Canberra-based Financial Risk Analyst, Justin Beeforth, and it illustrates how our advisers always “go the extra mile” to help our clients in any way we can.
It demonstrates how taking the time to dig a little deeper to full understand a client’s individual situation can help ensure the best possible claims outcomes. This story is about Bill [name changed to protect client privacy] who has been a client of AFRM since 2007. Bill is another person referred to us by someone who thought we could help.
Justin took over looking after Bill’s best interests in September 2018, following the retirement of former AFRM Director, Mark Hoskin.
After Bill called to advise AFRM that he had been again diagnosed with cancer, Justin visited Bill at his home to talk through his situation and to see how he might be able to help.
While Bill and Justin were talking, Bill said the insurance companies he had been dealing with seemed to be confused about what “disability” is versus a bout of cancer. Justin promised to fix that issue.
Justin realised Bill’s comment was critical to his current circumstances because Bill’s policy terms allowed for the continuing payment of a benefit until the age of 70 for disability as a result of a traumatic condition.
Bill suffers from a form of B-cell lymphoma that has resulted in him having to file claims on his income protection insurance in response to three separate bouts of cancer over the past decade; from May 2009 to December 2011, from July 2013 to January 2016 and from August 2018 to the present.
Through that period Bill has endured numerous bouts of chemotherapy and has developed a range of varied and complex symptoms that have ‒ in short ‒ made his life hell.
Compounding the disability caused by his symptoms, Bill lost his wife to cancer in 2015 which led to the onset of depression.
Bill is now a frail 67-year-old whose business is failing because he is simply unable to continue to work. He held optimal income protection cover from a major insurer and claimed on it each time he was diagnosed.
Following the chemotherapy treatment for the second bout of cancer, Justin said Bill was “left pretty banged up” by the time he went into remission in Jan 2016.
At the time, his insurer ceased paying out on his income protection insurance on the grounds that Bill had ‘gone into remission’ and could return to work. This was despite Bill still being very incapacitated and not in a fit state to resume working.
Having identified the insurer’s ruling was not consistent with the terms of Bill’s policy, Justin suggested Bill’s GP draft a letter detailing Bill’s medical conditions and symptoms since January 2016 that were ongoing and persistent, irrespective of the cancer remission.
The doctor’s March 2019, letter recorded that Bill had seen him for treatment some 54 times since February 2016, with an average of two to three visits per month.
Among the raft of debilitating symptoms listed by his doctor were severe insomnia caused by serious chronic pain, lethargy and other impairments of motor function that left him incapable of working more than four hours per week, at best.
Bill’s GP concludes: “In my opinion he remained incapable of sustaining any sort of paid employment throughout this period and remains totally disabled with no prospect of recovery.”
Armed with this new medical report, Justin was able to persuade the insurer to agree to a conference call between the insurer’s Chief Medical Officer and Bill’s haematologist in early April.
On the agenda, was a determination of which symptoms were related to Bill’s cancer treatment ‘hangover.’ The haematologist supported the argument that all of Bill’s ongoing issues stemmed from the impact that the cancer treatment had had on his body.
The call ultimately resulted in a determination that Bill’s ongoing condition was indeed a continuation of the cancer claim that he had been on when his payments had been terminated in 2016, rather than a new claim.
On 17 April 2019, Justin got a call from the insurer confirming they were going to be providing Bill with back pay going all the way back to when they had ceased making payments on his income protection policy back in 2016.
Justin said: “They called to let me know that they’re going to backpay him approximately $8,000 a month (monthly benefit of $7,400 plus premium refund of $600) for the last 31 months. That’s about $248,000.”
“When I told him we’d got him a positive result, Bill had to just sit down and cry.”
When asked how it feels to go into bat for a client and ultimately achieve that kind of a result, Justin’s response was short and sweet:
“It feels amazing mate, there’s nothing like it.”