COVID-19 has affected all of us in numerous ways over the past two years, but did you see the media report in late January flagging the possibility that in the future insurers may implement exemptions for people who had suffered from COVID-19 at any time their past?
It was an ABC News report posted on 29 January 2022, with the headline – Why a serious case of COVID could affect your insurance, even decades from now.
The article’s premise was based on the fact that insurers currently have a range of cover exemptions for pre-existing medical conditions.
It argued that COVID-19 or “Long COVID” could be treated as a medical exclusion, even if the applicants had suffered the COVID infection decades earlier.
The article also noted that: “Such exclusions, if they eventually occur, would be unlikely to apply to those with an existing life insurance policy unless they make changes or move to a new insurer.”
Now, I can imagine many of my advice sector colleagues would feel that such a hypothesis is just another media beat-up, but the article does cite some well qualified academics to support its argument.
For example, Jane Tiller from Monash University's Public Health Genomics Program is reported to foresee a future in which a prior episode of COVID-19 infection could impact levels of cover available, even decades into the future.
"Because of the reports of long-term effects of COVID-19 that we're seeing come through there might be risks in people being able to get life insurance," Ms Tiller is reported to have said.
Not only that, but Ms Tiller also theorised that insurers may have different levels of exclusions based upon whether or not you had a more severe or “mild” strain of COVID-19.
"As long as there's evidence to support a differential risk, an insurer can use that to discriminate against someone who had that risk factor,” she said.
"I'm concerned that perhaps we end up with a big divide between people who, through no fault of their own, no poor life choices, have been exposed to a serious pandemic virus."
The report also cited Professor Julie-Anne Tarr, from Queensland University of Technology's Faculty of Business and Law, claiming that some insurers last year had planned to carve out COVID-19 illness as ineligible for policy covers, such as Income Protection and Trauma.
However, she said the insurers quickly realised such a move would not pass the proverbial pub test and it never went ahead.
At AFRM, we have witnessed insurers falling into line over the past 18 months and assuring all existing policyholders that they would be covered under their existing policies if they were to contract COVID-19.
However, we have also witnessed insurers delaying eligibility for new policies for people who have contracted COVID-19. That is, persons applying for new policies are having their new applications delayed for 30 days - or even up to six months - until they are COVID-19 treatment and symptom free.
Once the required timeframe has passed, these people can then sign a declaration of good health and re-apply for the new insurance cover.
At least eight of the major insurers we write business with have implemented a one-month delay, as described above, for new applicants who have previously contracted COVID-19. Further, at least one major insurer has indicated to us that it would require a six-month symptom free period for an applicant in the same circumstances.
So, while it is far too early to know if Ms Tiller’s conjecture has merit, at AFRM we can’t help considering the situation in the context of how challenging we know it is for anyone seeking new insurance cover if they have ever suffered from a prior mental illness.
It is, perhaps, ironic that we have seen other media reports claiming that the pressures of that pandemic will escalate the level mental health related claims into the future.
On 8 February 2021, ABC News reported that the Public Interest Advocacy Centre (PIAC), a community legal service that specialises in policy advocacy, claimed people with mental health problems face "significant barriers" in obtaining and using insurance.
It quoted senior PIAC solicitor, Ellen Tilbury, saying: "We think the mental health impacts of the pandemic highlight the need for scrutiny of the current practices of life insurers. More people who are seeking help now … could find their ability to obtain insurance in the future affected."
The report also claimed that an ABC examination of 13 major insurance providers found that all have blanket mental health exemptions on their basic income protection policies.
Ms Tilbury is reported to have noted: "Exclusions rarely differentiate between mental health conditions. A past episode of mild anxiety, for example, can lead to cover being excluded for all types of mental illness."
The 8 February report also said that during the current pandemic calls to SANE (a national mental health charity) rose 78 per cent and have continued at elevated levels.
At AFRM we know people with prior mental health issues have difficulty in obtaining new policies without exclusions.
It is too early to say what the future holds for people who have contracted COVID-19. Experts are still gathering data on the health impacts of the various strains of the virus.
This point was noted in the 29 January 2022 ABC report I highlighted at the outset.
It reported that Deakin University Associate Professor, Martin Hensher, had cited United Kingdom research showing that one in 10 COVID-19 sufferers endured months of "Long COVID", or post-acute COVID syndrome.
He said that for a small portion of people there are already signs that COVID has done tremendous damage to their bodies, and not just their lungs.
"They're seeing neurological damage and some people are seeing kidney damage," Mr Hensher said.
"These researchers are really suggesting that we might actually expect those people to be at an elevated risk of illness in the longer term, over coming years, as a result of that. Even people who've had relatively mild COVID infections actually might be at some elevated risk for particularly cardiac and neurological conditions," he said.
Significantly, the Financial Services Council (FSC) felt the need to comment in both of the news reports I referred to above.
On the question of how people who had previously caught COVID-19 may be treated by insurers in the future, Nick Kirwan, the FSC’s Policy Director - Life Insurance, reportedly said that if such people had long-term health impacts from their COVID infection, insurers would likely take that into account; in the same way they currently do for people living with other long-term medical conditions.
However, Mr Kirwan conceded: "You never know what's going to happen in the future.”
Accordingly, he said anyone concerned about how the COVID pandemic may affect the insurance sector and their ability to obtain cover into the future should take out life insurance policies today to ensure maximum protection.
On the issue of mental health and life insurance, in the report published on 8 February 2021, Mr Kirwin attributed the significant rise in mental health claims during the pandemic to be "a major contributing factor" to the difficult financial position the entire insurance sector is currently facing.
But he denied insurers were actively discouraging people who had suffered past mental health issues from seeking the financial protection provided by life insurance.
"Everyone in the life insurance industry would encourage every Australian to get the health support they need straight away — always," Mr Kirwan said.
"Equally, all Australians should take out life cover as soon as they need it and not wait until after they've had a health scare. Once someone has taken out life cover, they don't need to disclose any further health information to keep it in place for as long as they need it."
While we at AFRM may not always agree with public statements made by the FSC, we do agree that the best way to avoid the chance of being caught by the potential exclusions raised in both news reports is to be proactive today about your financial risk management strategy.
If you, or your clients, already have a financial risk management plan in place that includes insurance, ensure that your cover provides the appropriate level of protection for your forecasted life circumstances.
And if you, or your clients, don’t have insurance protection in place at all right now, then we would encourage you to reach out to us.
We’d be happy to assess your currently financial circumstances and to work with you to put in place an appropriate financial risk management plan.
Time and again in recent years we have seen that the best way to protect yourself against changes to the insurance market is to have existing policies locked in place before the change comes.
Whether it is for you and your family – or your clients and their families – having appropriate financial protections in place is the only sure-fire way of protecting your future, today.
Sincerely,
Rob Vitnell
Managing Director AFRM
AFRM's most experienced advisers complete all FASEA educational requirements years before deadline
No matter how you measure it the professional qualifications and experience of AFRM’s advisors are beyond question.
The Financial Adviser Standards and Ethics Authority (FASEA) was established in July 2017 with the objective of making the financial advice industry more “professional” in the wake of numerous government reviews and industry scandals.
At the time, the advice sector had been the subject of 12 separate government reviews in a 10-year period.
FASEA was charged with setting mandatory educational and training requirements, including developing and setting a national industry exam and creating a code of ethics for Australia's financial advisers.
We have made no secret of our view that a number of the requirements introduced by the Federal Government back in 2017 when it established the FASEA were ill-conceived and not well thought through.
From early 2019, AFRM Founder and former Managing Director, Nick Hatherly, published numerous communiques on the subject including his view that AFRM’s advisers did not need to improve their levels of service and professionals because:
And now, even though the Federal Government has now decided to scrap FASEA, introduce a single-disciplinary body for oversight (the Financial Services and Credit Panel) and perhaps introduce a new “experience pathway” for advisers with more than 10-years’ experience, we are proud to report that AFRM’s two longest serving advisers completed all of FASEA’s education requirements last year ‒ three years ahead of the original regulated deadline of 1 January, 2024 ‒ and five years ahead of the revised deadline of 1 January 2026.
“In February this year, AFRM adviser Phil Hatherly celebrated his 15th anniversary with AFRM and one of our Sydney-based advisers, Dan Musumeci, will achieve his 16th anniversary working with AFRM in May,” AFRM Managing Director, Rob Vitnell, said.
“Both men have proven their exceptional professionalism by completing all of the FASEA educational requirements as soon as possible. They certainly will not need to take advantage of the potential ‘soft option’ of an ‘experience pathway’ proposed in the Government’s Education Standards for Financial Advisers, Policy Paper, December 2021.”
“AFRM Adviser, Richard Dawson, also completed all of FASEA’s educational requirements last year ‒ while every single AFRM adviser has also already passed the mandatory FASEA Ethics exam.”
“These efforts demonstrate that while we at AFRM have always set ourselves a high benchmark for the level of professionalism with which we serve our clients, our team is certainly not resting on its laurels when it comes to our commitment to continuous improvement and professional development into the future.”
“I am also pleased to report that advisers, Sam Brennan and Chris Wlodarczyk and myself are also well on our way to completing all requirements well in advance of the deadline,” Rob said.
“We pride ourselves in the level of knowledge and expertise we bring to the table for our clients and Phil, Dan and Richard’s determination to have every education requirement completed as soon as possible demonstrates that commitment.”
Case Study:
We have often said that AFRM will always go the extra mile to ensure we obtain the best possible financial outcomes for our clients if the time ever comes that they need to make a claim on their insurance.
The following update to a previously published case study serves to illustrate that point well.
You may recall that in November 2021, we published a case study about our client, James, a middle-aged, married professional with two young adult children, for whom AFRM was successful in obtaining a lump sum Trauma benefit payment following James being diagnosed with prostate cancer.
This was a challenging claim to get over the line due to the fact that James’ policy was relatively new, having been established in mid-2020 in the wake of James wanting to reduce his levels of cover in order to reduce his annual premium payments.
The primary challenge arising when the insurance company chose to closely examine James’ medical history to ensure full and proper disclosure had been made at the time the new Trauma policy had been established.
The complexities of the claim were successfully managed by AFRM Claims Manager, Anthony De Lellis, and James received a benefit payment of about $300,000, representing a full settlement of his entitlement under the Trauma policy.
In the case study published last November, we also reported that as part of the review of James’ financial risk management plan, with the objective of reducing his overall premium payments, that AFRM also locked in for him a new Agreed Value Income Protection (IP) policy, which included a Critical Illness Option.
So, naturally, after AFRM was successful in getting James’ Trauma Claim accepted, we immediately raised the issue of his Critical Illness Option under his IP policy with the insurer.
Given it was the same company, AFRM also asked if the insurer’s same Claims Manager could assess the new claim and if the same medical information used to support the original Trauma claim could also be used to support the IP claim – politely suggesting that it would be somewhat onerous to require James and AFRM to go through the entire formal application and medical discovery process all over again relating to the exact same illness.
AFRM’s Anthony De Lellis noted that AFRM’s interpretation of the wording of the IP policy’s Critical Illness Option suggested that James was eligible for the defined “Critical Illness Event” benefit for “Cancer” which was six times his monthly benefits from the date of diagnosis of his Prostate Cancer.
Unfortunately, the different policy required a different claims manager to assess it because any IP claims were handled by a different group of specialists within the insurance company.
AFRM acknowledged that but again requested that the new claims manager rely upon all of the previous materials supplied to support the previous Trauma claim rather than have to go through the entire formal application process all over again.
The insurer responded saying it was willing to waive the “Initial Attending Doctor’s Statement,” and to accept other supporting medical documentation used in supporting the previous Trauma claim.
However, it insisted that AFRM and James fill in and complete the full formal “Initial Claim Form for Income Protection” before it would allocate a new case manager to the new claim.
Working with James, AFRM’s Anthony De Lellis, was able to get all of the newly required documentation finalised and formally submitted to the insurer within two days. This was late October 2021.
On 1 November, Anthony was pleased to report to James that his IP Critical Illness Option claim had been accepted by the insurer; paying the maximum possible benefit which totalled close to $90,000, including a refund in premium payments of more than $3,000.
This was in addition to the approximate $300,000 James had received in his previous Trauma claim benefit payment.
Suffice it to say James was extremely happy with the level of service and support provided by the AFRM team.