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Case Study



Here is a case study with a difference…


Mind you, it does feature some familiar AFRM themes…

  • A client financial risk management plan review meeting triggered by a client unhappy with Income Protection (IP) and Total and Permanent Disability policy insurance premium increases this year,

  • A retrospective insurance claim discovered during that review meeting only because AFRM’s adviser thought to ask the client about any past medical issues that had not perhaps been shared with AFRM during previous review meetings?

  • The client not declaring the injury at the time it happened because he did not realise it could be a valid claim,

  • AFRM’s deep knowledge of insurance policies, products, terms, and definitions making a successful claim possible ‒ even on a policy that had been cancelled years ago!

Well, that very last bit is what makes this case study a little different to any we have shared with you to date.


Another factor that makes this story interesting is that the client had exclusions written into his policy for shoulder and knee injuries - due to past reconstruction surgeries – and yet AFRM was still successful in having a claim for a broken collar bone paid.


…And again, the claim was paid on a policy that had been cancelled years ago – back in 2018 to be precise.


This story starts earlier this year with our client Ian, [name changed to protect client privacy] calling for a review meeting with his AFRM adviser, Chris Wlodarczyk, with the sole objective of reducing the amount he had to pay in premiums after a 70+% increase on his IP policy this year.


Not to mention an increase in his Total and Permanent Disability policy premiums as well.


Financially literate, Ian instructed AFRM’s adviser that to reduce his premiums he wanted his IP policy to be altered from an “Agreed Value” to an “Indemnity” style policy.


Accordingly, Ian’s AFRM adviser, Chris, provided a general overview of the various different types of insurance policies including a detailed breakdown of the differences between Indemnity and Agreed Value IP policies and how each operates.


This included pointing out that at the time of making a claim an Indemnity policy can potentially be less generous in terms of the benefit paid because some indemnity policies will only review the last 12 months income when calculating pre-disability income, while Agreed Value policies can be more secure from a claims perspective because the benefit amount is agreed in advance.


Chris, of course, also noted that Agreed Value policies are generally offered at a higher premium cost and are no longer available in the marketplace, in the wake of the Australian Prudential Regulation Authority’s (APRA) recent intervention into the IP insurance market.


AFRM adviser, Chris, also outlined a range of other ways he may be able to reduce his out-of-pocket premium costs while keeping his Agreed Value policy, such as:

  • the ability for insurers to allow funding of insurance premiums via a partial rollover arrangement (known as “superlinking”),

  • Reducing the level of cover or the monthly benefit payable under the policy. For example, if the maximum benefit payable is 75% of pre-illness or injury income, then if the client chooses to reduce the level benefit, they can in turn reduce the premium cost; and,

  • “Standard” versus “Premier” policies. By this, we mean that Premier style policies (such as those held by Ian) have a range of additional benefits and inclusions. Examples include specified injury benefits, trauma benefits (under some policies), nursing care benefits, partial disability benefits from day 1 (regardless of waiting period), and multi-tiered total disability benefits.

In contrast, “Standard” policies do not have these additional inclusions and may have restrictions that come into effect when a benefit is paid, but accordingly that can also potentially have considerably lower premium cost.


Having heard all of the considerations and variables put forward by AFRM, including the risk that indemnity IP policies represent because future claims will be assessed against actual income earned prior to disability, instead of being guaranteed as is the case under an Agreed Value policy, Ian acknowledged the advice but directed AFRM to press forward in amending his policies, switching them from Agreed Value to Indemnity style IP policies.


Towards the conclusion of the meeting, as is routine among AFRM advisers, Ian was asked if he had suffered any medical issues in the past that AFRM may not be aware of?


The answer was - yes. Apparently back in early 2018, Ian crashed his mountain bike resulting in a broken collar bone and a broken bone in his hand.


He never raised it at the time because he had exclusions in all of his policies due to past shoulder and knee reconstructions surgeries he had had.


Ian couldn’t see how he could claim on a broken collar bone when shoulder injuries were specifically excluded from his cover.


An added level of complexity was that as a result of his last AFRM financial risk management plan review in mid-2018, Ian had agreed with recommendations to change his IP policy from an indemnity style policy to an Agreed Value policy to increase his benefit amount, in line with increased earnings.


Regardless of this fact, Chris advised that there was a potential that the original policy included a “Specified Injury Benefit” that can 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 commenced an investigation by contacting the relevant insurer and asking for copies of the original Policy Schedules, definitions, and Product Disclosure Statement (PDS) to be provided to AFRM for review. Again, this policy had been cancelled in late 2018 and replaced with Ian’s current IP policy.


He also confirmed with the insurer that it would honour a retrospective claim made under the cancelled policy if a valid and properly documented claim was uncovered and submitted by AFRM.


Upon reviewing the Policy Schedule, Anthony was confident Ian had a valid claim despite the shoulder exclusion in the schedule for two specific reasons:

  1. The definition of a “Specified Injury Benefit” on page 54 of the relevant PDS included “collarbone” in its list of the broken bones covered by the benefit.

  2. Separately, the shoulder exclusion in the Policy Schedule was worded as follows:

“No benefit shall be payable under this policy if the claim is directly or indirectly related to any disease or disorder of, or injury to the left shoulder unless in the opinion of independent medical assessment acceptable to us, the disability was in no way associated with, not aggravated nor complicated by the pre-existing condition relating to the excluded disorder.”

[relevant section made bold for emphasis by AFRM]


AFRM’s Anthony De Lellis, immediately contacted the insurer’s Case Manager to ask if the insurer and their underwriter could provide an opinion as to whether they would agree with AFRM’s interpretation of the relevant clauses and definitions in each of the documents.


An affirmative opinion was later provided, so AFRM submitted the formal claim with all relevant supporting documentation and soon after the full benefit, as defined in the PDS, was paid.


The “Specified Injury Benefit” was defined 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.


Needless to say, at a time when Ian was seeking to reduce pressure on his family budget, the unexpected windfall was certainly welcome.


Not only did the benefit amount help cover historic out-of-pocket medical costs relating to the broken collarbone (the gap between private health insurance cover and actual cost) but it was also well more than required to cover the cost of his IP insurance premiums for the next year!


Once again, AFRM’s team have demonstrated how their deep knowledge of insurance policies, products, terms, and definitions not only identify potential claims that may not be obvious to others but the respect that AFRM has earned from insurers provides us with a level of access that allows us to openly ask the tough questions and to make successful retrospective claims on policies that have been cancelled years ago.


Why wouldn’t you trust AFRM to handle all of your risk advice and manage your life insurance claims?


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