For those of us working in the advice sector, APRA’s 2018 claims data demonstrating that client life insurance claims outcomes are better when the consumer has an adviser comes as no surprise. However, to continue a theme of previous communications this year, the challenge for all of us is how do we raise awareness among the broader public of this fact? APRA’s report, released late June, presents key industry-level claims and dispute outcomes for 20 Australian life insurers writing direct business (i.e. excluding reinsurance), covering a12-month period from 1 January 2018 to 31 December 2018.
The admittance rate across all cover types and distribution channels was 93 per cent in the reporting period.
The message we need to be unabashed about spreading far and wide is APRA’s observation:
Generally, Individual Advised business shows higher admittance rates than Individual Non-Advised for the same cover type.
It is a simple statement but the numbers that back it up make a powerful point.
In all the major categories, advised life insurance achieves higher admittance rates [successful client claims outcomes] than non-advised. APRA’s claims data for the 2018 calendar year reports the following comparison in admittance rates between advised and non-advised life insurance:
Last month, I discussed ASIC’s Financial advice: Mind the gap report (REP 614), which found that most consumers don’t understand the difference between general and personal advice; nor know the responsibilities of advisers in each case. This month, the challenge remains the same. How do we best raise the level of client and general consumer awareness about the life insurance products available to them and how such products can be positively life-changing when the time comes to make a claim?
Also highlighted last month, was the fact that AFRM’s advisers are frequently encountering situations in which a client has been suffering in silence, unaware that the circumstances they had been enduring were in fact a situation that merited a claim. It has only been through the AFRM team member taking the time to dig a little deeper and asking questions about the client’s broader circumstances that we have discovered the client has had a valid claim but has not recognised it. As advisers who are experts in your field, just as AFRM are specialists in risk advice, I am genuinely interested in hearing from you about any techniques or approaches you have applied that have been successful in increasing client awareness and understanding of their situation. We believe the information we are presenting to you within this communique and in the following case study provides you with the key building blocks to be able to very effectively explain to your clients why obtaining specialist risk advice is crucial to a person having a comprehensive long-term financial plan in place. At AFRM we have an internal mantra that drives the way we run our business. It is a simple one:
Help more people.
That’s why we take to time to dig a little deeper and that’s why we keep uncovering situations in which a valid claim has been overlooked by our clients; and in some case by other advisers. While we are gratified by the fact that we continue to help more people, we can’t help thinking that improved consumer education and awareness will help ensure no potential client claims ‘slip through the cracks.’ So, again, I would be grateful for any suggestions you have on how we – as a sector – might better achieve this. Meanwhile, please take a few moments to read the Case Study below which illustrates a few of the points I have made above. The right risk advice coupled with the right claims support can truly change lives for the better. Until next time, live your life well!
Sincerely,
Nicholas Hatherly
Managing Director AFRM
Case Study
In January this year, AFRM adviser Dan Musumeci met with client Emma [name changed to protect client privacy] and her husband to discuss cutting back their insurance cover in the wake of their finances taking a hit over the previous 12 months. Her husband was not working and income from Emma’s own consulting business was down significantly because she had not been actively pursuing new business for quite a while. Dan cautioned that cutting all insurance cover may not be the best option to protect the client’s long-term best interests. That said; the meeting concluded with Dan agreeing to obtain alternative quotations for the sake of the couple making some comparisons before finalising a decision on what they would do next. Dan followed up with a phone call to Emma in February with the promised information and it was during that conversation that Dan suspected a deeper undercurrent needed investigation.
“I asked her if there was anything that was wrong,” said Dan. “And at this point, she broke down and advised that she had been dealing with a lot of stress and anxiety lately. They had more than $1.5m in debt, husband wasn’t working and with her income being almost non-existent, they were looking to put the home on the market.”
Through the course of the conversation a light was gradually shed on a much larger landscape of circumstances that had cumulatively led to that point in time.
A friend of Emma’s had suffered an accident while helping Emma move business premises back in 2018. The accident had led to Emma becoming sad and anxious. As a result, the business suffered because Emma started putting off new work and only doing the bare minimum of what needed to be done. This, in turn, led to the loss of a major client and the drastic reduction in Emma’s income. Discovering this broad range of contributing factors convinced Dan that Emma needed more help than he could provide alone.
“I asked if she had spoken to her GP and she said she hadn’t. So, I asked her; as soon as we finished the call; to call her GP and talk to them about what had been going on in her life,” Dan said.
Dan kept checking in with Emma over the following months and learned that not only had Emma been formally diagnosed with depression, but she had also commenced counselling sessions with a psychologist to treat the condition. Fortunately, because of the advice received earlier from Dan, Emma still had her Income Protection (IP) insurance in place and now Dan flagged to Emma that her current circumstances merited a claim. A subsequent claim on Emma’s IP insurance was approved ‒ and by mid-June Emma received her first payment in excess of $30,000. The terms of Emma’s policy mean that she will continue to receive payments until either she goes back to work at normal capacity, or until the age of 65. Upon hearing that her claim had been approved, Emma sent the following note to Dan:
“Thank you, thank you, thank you!! You are an angel.” “I received an SMS message last night from [the insurer] advising of the processing of the payment.
“Many tears have been shed since - tears of utter relief. “The processing of the claim couldn’t have come at a more needed time." "I wouldn’t have been able to make the mortgage payment next month, so a huge thank you for being my advocate and all your help with processing my claim but most importantly asking if I was OK all those months ago when I contacted you to talk about my policy options.” “If you had not asked me if I was OK, I would still be suffering in silence and wouldn’t have sought the medical help I need.
“I cannot thank you enough.”