AFRM Referral Partner Update - 4 May 2022
In March, the life insurance industry’s independent body charged with monitoring the industry’s compliance with the Life Insurance Code of Practice – the Life Code Compliance Committee – released its Life Insurance Code of Practice Annual Industry Data and Compliance Report 2020−21.
Inadvertently, the Report provides a validation of everything we do at AFRM.
We help our clients with every aspect of administering their policies, including helping make sure that all renewals and premiums are paid on time. Or, if not, ensuring that those policies are not cancelled without our client’s knowledge.
On a number of occasions when this kind of thing has occurred, we have had policies reinstated for our clients.
If our clients ever do need to make a claim, we advocate on their behalf with the insurer, and manage every aspect of the claim process, liaising with the insurer, compiling all of the supporting documentation required to ensure the claim is accepted, and if any objections are raised by the insurer we will use our exceptional knowledge of product and policy wording to present the best possible arguments that the claim should be accepted.
In short, we only submit claims we believe are valid and that should be approved. And insurers know we will adhere to that belief until we get the best result possible for our clients.
Consider what we do in the context of observations made in the March Report by, Jan McClelland AM, Independent Chair of the Code Compliance Committee.
On insurers not providing policyholders with annual renewal notices on time:
“More than 373,000 customers were impacted by failures in subscribers’ systems and processes for managing compliance with section 6.3 of the Code regarding annual notices.”
“The potential for customers to be adversely impacted by not receiving their annual notice on time and with all the information they need is high.
“It could result in the customer’s policy lapsing without their knowledge or customers continuing to pay for a policy that is inappropriate or unaffordable, particularly if they are paying for the policy via a direct debit facility.”
On complaints management processes:
“The 2020–21 data showed that almost half of all claims decisions were reversed when a customer made a complaint. This suggests that subscribers’ processes for assessing claims in the first instance may be inappropriate or inadequate.”
“Having a claim incorrectly declined, then being exposed to a potentially lengthy dispute resolution process, can cause severe detriment to a customer at a time when they are already vulnerable.”
Data in the report was sourced from the 24 major insurers who “subscribe” to the Life Insurance Code of Practice [named in Appendix 1 of the Report]. Industry-wide the report said there were 32 million policies in place as of 30 June 2021 ‒ 76 per cent were Group policies, 13 per cent were Retail and 11 per cent were sold Direct.
During the period, 110,488 claims were assessed and 94,688 were resolved. Of those resolved, it should be noted that 93 per cent were accepted and just seven per cent declined.
However, a very significant 429,347 policyholders were impacted by breaches to the Code of Practice, almost double the previous year. The top three issues related to:
Policy changes and cancellation rights (Chapter 6 of the Code)
Policy design and disclosure (Chapter 3 of the Code)
When you make a claim (Chapter 8 of the Code)
Following are a series of excerpts from the report that I believe speak to the fact that none of these issues would have arisen if the policyholders were clients of AFRM.
The report stated that breaches of section 6.3 of the Code, relating to annual policy notices, impacted the highest number of customers ‒ at total of 373,343 (87%) in 2020–21.
The report said:
“The annual notice is an important source of information for customers regarding their life insurance policy, providing customers with clarity on the cost and level of their cover, enabling them to decide whether the product is still suitable for their needs.
“Failure to issue the annual notice on time, or failure to include all relevant information in the annual notice, can adversely impact customers and prevent customers from making an informed choice on the suitability of the life insurance policy.”
Re complaints made about claims, the report noted that a staggering 45% of claims decisions were reversed when a customer made a complaint:
“The rate of claims decisions overturned and admitted in favour of the customer following a complaint or request for a review suggests that subscribers [insurers] have further work to do to ensure claims assessments are being appropriately and thoroughly considered in the first instance.
“For customers, having their claim incorrectly declined and then being subjected to a potentially lengthy dispute resolution process can cause severe detriment.
“Furthermore, there may be customers who did not lodge a complaint following a claim decline who would have had a decline decision reversed had they done so.”
Further on this theme, the report also noted that insurers had not improved claims assessment timeframes, adding that “assessment timeframes for income-related claims have been increasing over the last four years.”
“A fair, transparent and thorough claims process is important. The claims process for a customer often occurs during an extremely stressful and challenging period of their life.
“They may have no income, or are dealing with illness or injury, and so unnecessary or unexplained delays have the potential to exacerbate already difficult situations.”
The Report’s data and observations relating to admittance rates for re-opened claims is also particularly telling.
“The fact that most re-opened claims were subsequently admitted when customers provided additional information highlights the importance of subscribers [insurers’] working closely with customers during the claims process to be able to efficiently obtain all the information needed to assess the claim.
“We suggest that subscribers ensure they provide clear and accessible advice to their customers about what information must be provided at the outset to enable the claim to be assessed.
“Re-opened Trauma claims were most frequently admitted, accounting for 82% of all admitted re-opened claims, followed by re-opened DII claims (80%).
“Consistent with the assessment requirements of Trauma and DII, most of these re-opened claims had originally been closed because the customer or their representative had not provided the information required to assess the claim on an ongoing basis.”
The final two excerpts I will highlight here relate to recommendations made to insurers about how they might improve the claims assessment process, especially when complaints have been made:
“The Committee suggests that subscribers closely examine any claim that has been re-opened and admitted after a complaint or a request to review the claim. It may be that claims staff are incorrectly assessing the claim at the outset through lack of experience or technical competency, indicating the need for better oversight and training…”
“The Committee is concerned with the percentage of decisions that were overturned industry wide and reiterates the need for subscribers to improve on their claim assessment and decision-making processes.
“As with the high volume of re-opened claims that were subsequently admitted by subscribers [insurers], it appears that claims staff are failing to correctly assess the claim, either due to a lack of experience or technical competency, or because subscribers [insurers] are not providing sufficient oversight, support or training to these staff, or a combination of both.”
As I said at the outset, this Life Code Compliance Committee report totally vindicates the AFRM business model and the service we provide our clients. Again, none of these negative policyholder experiences would have arisen if those policies were held by AFRM clients – and if those claims had been managed by AFRM.
Our role is to be an advocate for our clients and, when necessary, hold insurers to account to ensure our clients achieve the full and correct claim benefit to which they are entitled.
We step in on behalf of our clients and manage the entire claim process, taking that stress away, so ideally, they can focus on rehabilitation and getting well again.
Our aim is to provide our clients with the best possible claims experience during what can be the most emotionally, intellectually and physically challenging time in their lives.
Having achieved $238m in client claims paid, we hope, also serves to make that point.
This missive is not intended as a humble – or not so humble – brag. My intent is to demonstrate the value we provide our referral partners, their clients, and our own.
We hope you will be encouraged not only to recommend our services to your new clients but to anyone you know, who may require financial risk management advice.
AFRM Managing Director
In many of our case studies we share with you examples of what can go wrong when you do not have an up-to-date financial risk management plan in place or when you cancel, or downgrade, your cover as a means of saving money in your monthly budget.
This case study highlights the opposite. This case study demonstrates the outcomes possible when you keep good levels of cover in place for the long-term and trust that all of your financial risks will be managed appropriately if the worst should happen and you need to make a claim.
It is the story of Jane – a long-term AFRM client who along with her husband, Joseph, are principals of a successful professional practice with an extensive client list.
Accordingly, each have financial risk management plans that address the fact that the ongoing financial success of the practice is highly dependent upon both of them continuing to be able to work.
Jane has Income Protection (IP), Term Life and Trauma with Total and Permanent Disability (TPD) policies.
Jane has always been the primary point of contact for the couple’s AFRM advisers over the years, holding regular review meetings each year.
With the ongoing success of their professional practice, the couple saw no great need to make changes to their level of cover ‒ a view shared by their AFRM advisers, the current one being Phil Hatherly, one of AFRM’s most senior advisers, who has been with the company 15 years this year.
However, over the years AFRM did provide advice and assistance to Jane and Joseph regarding setting up Trauma cover for their three children, and also as the eldest of those children reached adulthood, switching the relevant child trauma policies to adult, self-owned, policies.
Phil and Jane met in March 2021 for their annual financial risk management plan review.
They discussed impacts on the practice during the previous 12 months due to the COVID-19 pandemic, reviewed all existing insurances the couple had in place and, as with previous reviews through the years, deemed the current risk management plan appropriate for their current life circumstances.
Then, in the third quarter of last year Phil received a phone call that none on the team at AFRM ever wants to receive but is always ready for…
Jane called to say that after a routine mammogram check she had been given an initial diagnosis of breast cancer but was awaiting further pathology results to confirm the severity and extent.
Phil immediately commenced an assessment of the implications on Jane’s insurances and scheduled a follow up call as soon as further pathology results were known.
The early pathology suggested Stage 1 breast cancer but there was some evidence it may have spread to lymph nodes as well. Part of the tumour had already been removed, however there was concern among treating oncologists and surgeons that there may be an insufficient margin of healthy tissue in the vicinity of the tumour.
Jane advised that her medical practitioners were working on a strategy for further treatment.
Reviewing applicable insurances, Phil advised Jane her Trauma cover could assist with treatment and other out of pocket costs and that her IP policy would provide cover for lost income while Jane was unable to work.
Immediately after that call, Phil set the claim process in motion, advising the insurer of the diagnosis, that a treatment plan was being formulated, and that AFRM would be managing Trauma and IP claims on behalf of Jane and requested that the relevant claim form application packs be provided.
Within the week another follow-up call ensued with Jane, in which the sad news was relayed to Phil that a single mastectomy was required in the first instance and further gene testing was underway to determine if a possible double mastectomy may be required at some future date.
This call concluded with Phil letting Jane know that AFRM’s Claims Manager, Anthony De Lellis, would be assigned to assist and support Jane through each claim, managing all aspects of the process so that she could just focus on dealing with her medical treatment and rehabilitation.
That same day, Anthony called to introduce himself to Jane and to talk her through the details and information that would be required for each of her claims and explained how he would assist her through the administration and management of the process.
Anthony and Jane also discussed her immediate priorities and agreed to focus on the Trauma claim paperwork and supporting documentation as the highest priority, with the IP claim as secondary.
Significantly, Jane had the same insurer for both her IP and Trauma policies and when reviewing the Product Disclosure Statement for these “old” products from more than a decade ago, Anthony noted that the same “Cancer” definition applied to each claim.
By now it was late 2021 and, as is usually the case, the process of liaising with treating medical practitioners to compile all of the medical reports and other documentation to support each claim took several months, mainly due to continuing assessment of appropriate treatment for Jane.
By February 2022, both claims had been formally submitted to the insurer with full supporting documentation. At that time, Anthony highlighted to the insurer that the evidence provided by Jane’s medical reports demonstrated her condition met the policies’ PDS definition for Cancer.
Following submission of the claim applications, Anthony was in regular touch with the insurers to push for progress updates.
It is also worth noting here that a Trauma policy (and claim) is based upon the suffering of a specific illness or injury – in this case malignant cancer. There is no need to assess the claimant’s ability to work for a Trauma claim.
In contrast, IP claims are typically based on a medical assessment of the claimant’s ability to work.
However, in this case, Jane also had a Trauma benefit built into her IP policy contract that specified the policyholder would be paid the full insured monthly benefit for a period of six months (based on suffering the same illness or injury as defined in the Trauma policy) regardless of whether the claimant is able to work or not.
Thanks to the thoroughness with which Anthony had completed each claim application, there was no push back from the insurer on either claim and once due process was completed – including the insurer liaising with its reinsurer for agreement on the claim assessments – just over a month after AFRM had submitted both claims, we were formally advised that both Jane’s IP and Trauma claims had been accepted.
Jane’s Trauma benefit payment in excess of $2.9m was the largest individual Trauma claim payment ever achieved by AFRM. She also received a Financial Planning Benefit which entitled her to a reimbursement of up to $2,500 for financial planning advice related to how she should best handle receiving the Trauma benefit.
Jane also received IP and related benefits totalling in excess of $60,000.
In addition to her benefit payments, Jane also received a refund of premiums paid for both policies of more than $24,000.
While no amount of money can ever make up for the trauma of suffering from cancer and a mastectomy, AFRM was able to shield Jane from the stress of having to manage all of the work required to compile full claim applications (with all of the required supporting documentation) and achieve the best possible claim outcomes on her behalf to ensure her medical treatment and out of pocket costs were covered.
That provided Jane with the best possible foundation upon which to build her recovery, rehabilitation and return to wellness.