Building Trust in Your Life Insurance

The recent 498 report by ASIC looked into life insurance claims and disputes registered with an external dispute resolution entity in the Life Insurance Sector. It revealed detailed statistics around claims; claims paid in full, partially, and declined.

This report provides the industry with some invaluable insights, however it is also important that consumers become informed of these finding to prepare themselves better when considering how to purchase a life insurance policy, especially because decisions regarding how, where and what steps are taken could have a significant bearing on the probability of your claim being paid.

The detailed 120 page report reviewed data gathered over three years, covering 15 insurers who make up some 90% of the market by premium.  The report highlighted the claims outcomes by:

  • Life Insurance Company
  • Cover Type
  • Distribution Channel.

Distribution Channels Defined

None Advised (Direct) policy: A policy you can buy direct from insurance companies or financial institutions, without the involvement of a financial advisor. These policies are usually only underwritten when a claim is submitted.

Retail (Advised) policy: A policy purchased through an advisor or broker. Such policies are generally more detailed and accurate, requesting underwriting at application stage, making it less likely of a claim being declined.

Group Life Insurance: Typically these polices are what you offered by your superannuation fund and the policy owner is the Trustee of the super fund.  These polices are not guaranteed renewable and policy benefits terms and conditions can downgraded at any time. They also generally have lower expiry ages compared to Retail.

ASIC life insurance report found that non-advised (Direct) policy claims were 71% more likely to be declined, compared to retail policy claims (p. 53). This means that, statistically, when you go with an advised policy you are less likely to have a claim declined. Group policies were also revealed to have a 14% increased chance of being declined.

5 Steps You Can Take to Improve the Likelihood of Your Claim Being Paid!

We often get asked: “Is there anything I can do to increase the certainty of my claim being paid?” or “How do I know they will pay my claim?”

How to trust your life insurance

To answer your questions, we’ve developed 5 steps you can take today to provide you and your loved ones with more certainty. These steps are created to improve the likelihood of your claim being paid. The more of these steps you follow, the better your chances.

number-1Use a specialist

Insurance is complex and policies provide a lot of information and use a lot of insurance jargon, which might be difficult to understand. A specialist can help you:

  • Clarify the insurance terminology
  • Understand your insurance options
  • Decide which cover type best suit your needs
  • Determine the amount of insurance you need
  • Decide which insurers to consider

Speak to a specialist financial adviser or broker to determine which company and policy will offer you the best value and benefits, so you can protect the people you love from financial crises.

number-2Read the PDS of the proposed product

Some Product Disclosure Statements (PDS) can include 100+ pages of information. Ask you advisor any questions you might have and make sure that he explains anything you might not be 100% certain of. Don’t assume you know what you are buying, become fully informed by carefully reading the PDS. Pay attention to the exclusions in the policy and any definitions of pre-existing medical conditions.

number-3Full Disclosure

The ASIC report showed that 5% of claim disputes was due to customers none disclosure, make sure you do not become part of that 5 %.

The responsibility of disclosing all pertinent information rests on you the life insured. The Insurance contract details your duty of disclosure, and it is very important that you are open and upfront about any and all pre-existing medical conditions, including your smoking status, occupation, past times and any other questions in the application.

Answer all application questions honestly. If you do not fully disclose the personal information that’s requested at the application stage, the insurer may deny your claim and refuse to pay any benefits.

number-4Yearly Review

Regularly review your policy to ensure it still meets your needs and make sure to check in with your broker or adviser at least every 12 months.

Things in your life change, it’s important that you confirm what you are covered for and ensure your policy still meets your needs. Remember to ask if there have been any policy enhancements since you last checked in and run an updated comparison to see if you are still receiving the best value for your money. Invest time, be open and honest, the more you learn, the better prepared you will be.

number-5Lodging a claim

Use a specialist experienced in dealing with claims as they know what information is required at claim stage, they understand your rights and know when an insurer is overstepping their mark. People often jeopardise the chance of their claims being successful paid when they do not provide the correct information or when they do not understand what is required of them.

Conclusion

Building trust in your life insurance policy happens when you are fully informed, sort advice from a specialist, invested time in understanding the policy and have honestly disclosed all your relevant information during the application process.

However, if you already own a policy but feel uncertain that a claim will be paid out, contact a specialist and ask them to review it. It’s never too late to seek advice from a specialist.

The process of making a life insurance claim on a policy might seem daunting, which is why we’d like to offer you our Claims Assistant Service if you were to ever find yourself in the unfortunate circumstances of having to submit a claim.

Author: Russell Cain
Published: November 14, 2016

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