Incredible to think that January has already flown by, and we are already into February 2022! The new year brings with it ongoing challenges for our clients and our industry.
The COVID-19 pandemic continues to create economic uncertainty and many of our clients are continuing to curtail spending as a result.
This fact was vividly highlighted by the return of panic buying and stock shortages we all have no doubt witnessed in supermarkets in recent weeks; in the results of the ANZ-Roy Morgan Consumer Confidence survey released on 18 January; and also in various other media reports through January with headlines such as these:
The outlooks for investment markets and real estate are also uncertain, if we are to believe the various media reports we have been seeing lately (e.g. - Interest rate rises could cause property prices to fall in 2022).
On 18 January, ANZ Head of Australian Economics, David Plank, said:
“Consumer confidence dropped 7.6% last week as Omicron case numbers surged… Consumer confidence readings are usually positive during the month of January and the level of 97.9 is the weakest January result since 1992, when the Australian economy was experiencing sharply rising unemployment.
“We don’t think the economy is as weak as these data might suggest, with the shock of the Omicron surge and strains on testing capability the key drivers of the fall rather than underlying economic conditions. But the result highlights that concerns about COVID have the potential to significantly impact the economy if they linger."
For us at AFRM, these uncertainties only serve to underscore the importance of encouraging our clients to keep appropriate financial risk management plans in place to ensure they, their families and businesses have appropriate “financial safety nets” in place should the worst happen to them in 2022 and they fall ill or have an accident and are unable to work.
Of course, we understand that some people are finding it tough and are looking to reduce their “discretional” spending. It is a common conversation with clients in today’s economic environment.
Sadly, all too often, we see people looking at their life insurance premiums as the first and most obvious expense line item to delete from their family budget. However, we’d caution any client against simply throwing away their “financial safety net” – especially in such uncertain times.
It is important to always keep in mind when talking to your clients that a financial risk management plan is not an “all or nothing” scenario.
We are experts in finding a “middle ground” ‒ a compromise ‒ that may not be as large an impost on your client’s bottom line but that can continue to provide an ongoing financial safety net into the future.
There is a good chance we will be able to find your clients some savings by adjusting the structure of their cover while continuing to ensure their financial interests are protected into the future.
Of course, another factor to consider this year are the amendments introduced to the Insurance Contracts Act 1984, from 5 October 2021, as part of the Federal Government response to the findings of the “Hayne Royal Commission.”
Of significance, are the combined effects of amendments around the concepts in The Act’s “Part IV - Disclosures and Misrepresentations,” specifically:
Section 20B - The insured's duty to take reasonable care not to make a misrepresentation
Section 21 - The insured's duty of disclosure
Section 25 - Misrepresentation by life insured; and,
“Relevant failures,” as defined by Section 27AA - Meaning of relevant failure of The Act (that provides a means for insurers to cancel contracts in the event of any failure by the client to disclose all relevant details to the insurer at the time of application and purchase of a new policy).
Of particular significance is the fact that the wording of Section 20B now says clients have a duty “to take reasonable care not to make a misrepresentation” when making an application to purchase a new policy.
We have heard from at least one major insurer that this change may well lead to insurers asking significantly more questions throughout the application process in a bid to close the perceived potential gap between the legal interpretations of the old full duty of disclosure and the new “duty to take reasonable care not to make a misrepresentation.”
To put it simply, under the previous “duty of disclosure” the onus was on the client to provide any relevant information to the insurer at policy application time.
Now, the new “duty to take reasonable care not to make a misrepresentation” places the onus on the insurer to ask clear and specific questions in a bid to discover all the information that it needs to know at application time.
The upshot is a much fairer outcome for clients, but given the expected increase in questions from insurers, it will also be a little bit more onerous for clients to navigate the insurance application process.
Apologies for going on a slight tangent here ‒ but the point is this.
The process of analysing and purchasing life insurance products is constantly changing and evolving BUT ALSO the value that can be provided in terms of protecting your client’s financial interests into the future remains as valid as it has ever been.
It’s a time for level heads and careful analysis by specialists who deal in the field every day.
So, if any of your clients flag to you a desire to simply cancel their insurance cover outright as a means to cut costs, please encourage them to reach out to us first. We may well be able to help.
Whatever the new year of 2022 may bring, we look forward to working with you to provide the absolute best possible outcomes for your clients and ours.
Sincerely,
Rob Vitnell
Managing Director AFRM
Case Study:
“Thank you very much for your assistance, I can’t recommend you any higher, fantastic service.”
There are many rewarding things the Team at AFRM enjoy about helping our clients through the services we provide.
The satisfaction of knowing we have created the best possible financial risk management plan, tailored to each individual client’s needs, to ensure that their financial security is protected into the future.
Providing wise counsel and educating our clients about the numerous factors to be considered when formulating a sound financial risk management plan.
Receiving positive feedback to our newsletters and other communications as we seek to keep our clients informed.
And of course, the enormous satisfaction we all derive out of helping our clients when they need us most – at claim time.
Recently, we were absolutely delighted when those last two factors came together for our client, Pete [name changed to protect client privacy].
Immediately after reading the case study included in our AFRM Client Newsletter Q4 2021, distributed on 15 December, Pete got in touch.
The December case study told the story of how AFRM successfully made a “Specified Injury Benefit” claim on behalf of client, Ian [name changed to protect client privacy], for a broken collar bone even though the claim was made on a policy that had been cancelled a number of years ago.
Ian also had had exclusions written into that policy for shoulder and knee injuries - due to past reconstruction surgeries.
The potential for Ian to make this retrospective claim only arose because towards the end of an annual financial risk management plan review meeting his AFRM adviser, Chris Wlodarczyk, asked Ian if he had suffered any medical issues in the past that AFRM may not be aware of?
Ian reported that, back in early 2018, he had crashed his mountain bike resulting in a broken collar bone and a broken bone in his hand. He said he never raised it at the time because he had exclusions in all of his policies due to past shoulder and knee reconstructions surgeries.
Ian couldn’t see how he could claim on a broken collar bone when shoulder injuries were specifically excluded from his cover.
And, of course, there was the added level of complexity that that policy had been cancelled back in mid-2018.
Chris advised that if the original policy included a “Specified Injury Benefit,” that benefit can then be invoked in the event that specific, listed, bones are fractured/broken. He asked Ian to produce relevant medical records from the time of the mountain bike accident in early 2018 such as X-Rays, hospital discharge notes and any other relevant medical reports.
AFRM Claim Manager, Anthony De Lellis, then contacted the relevant insurer and obtained copies of the original Policy Schedules, definitions, and Product Disclosure Statement (PDS) and fortunately for Ian, the Policy Schedule’s definition of a “Specified Injury Benefit” included “collar bone” in its list of the broken bones covered by the benefit.
The policy defined the “Specified Injury Benefit” as: “...a benefit equal to the monthly Total Disability Benefit for the payment period from the date the specified injury occurred, even if the Insured Person is able to return to work during that period.” In Ian’s case that amount was close to $8,000.
So, having read that case study on 15 December 2021, AFRM client, Pete, reached out to us via email:
“Good morning,
“I’ve just read your email and the case study with the gentleman that broke his collar bone and the potential to make a claim.
“I’ve recently broken my ankle and never thought that this may be covered by my insurance policies – can you please advise if there are provisions for this with my policy and, if so, what you may need from me?
“I appreciate your guidance.
“Cheers,
“Pete.”
Pete had broken the bottom end of his fibula as a result of a mishap with his motorcycle.
Once again, AFRM Claim Manager, Anthony De Lellis, contacted the relevant insurer and obtained copies of the original Policy Schedules, definitions, and Product Disclosure Statement (PDS).
And this time around, fortunately for Pete, the Policy Schedule’s list of bone breaks under its “Specified Injury Benefit” included both “leg (below the knee and above the ankle joint tibia and/or fibula)” and “ankle joint.”
Jump forward to the second week of January 2022, and the insurer confirmed a benefit payment to Pete of almost $15,000, being the equivalent of two months’ worth of Pete's total income protection benefit under his policy.
Needless to say, Pete was quite chuffed by the positive outcome achieved on his behalf by AFRM.
“Thank you very much for your assistance, I can’t recommend you any higher, fantastic service.
“Cheers,
“Pete.”