When it’s OK to say the ‘F’ Word …
There are certain times when the ‘F’ word is not really appropriate.
In a Kindergarten classroom, for example. Or at your grandmother’s birthday party. Or in the boardroom when you’re about to seal the commercial deal.
There’s also another kind of ‘F’ word we’re often suss on.
It’s the cliched ‘Financial Adviser’ with a capital F. You know the ones – they push products and make you buy things and bamboozle you with fancy jargon.
Except by using a qualified financial adviser to assist you with your insurance matters and claims, it can actually pay off to use the ‘F’ word (and there are many of us planners and advisers who are not here to simply sell you products).
Did you know that you have a 70% better chance of an insurance claim being paid if you obtain financial advice from a qualified professional?
Navigating the insurance game
The topic of insurance can often be daunting and confusing one, particularly in the area of life insurance. According to Lifewise, an initiative of the life insurance industry, Australia is one of the most underinsured nations in the developed world.
In the 2015 Asteron Life Study, which looked at attitudes towards insurance, lack of understanding is a major issue: 9 out of 10 people say they don’t understand life insurance. What’s more, many face difficulties when they actually go to claim on their policy.
And yet, it is such an important area of financial protection to get right.
As Peter Kell from ASIC reported, life insurance is a ‘vitally important financial product that helps support consumers and their families at times of significant stress. Not being able to successfully claim on a life insurance policy can be financially devastating for the consumer and/or their family, so it’s important that the industry operates in a way that is fair and transparent.’
Insurance is usually marketed and sold directly to consumers by insurance providers and online sites. So what is the difference if you use a financial adviser to help you navigate these rough waters?
Have an adviser by your side: ASIC Findings
In October 2016, ASIC released its review of the life insurance sector’s handling of claims.
ASIC’s review examined 15 insurers covering more than 90 per cent of the market. The six-month review analysed three (3) years’ of data on the four major life insurance policy types – term life cover, total and permanent disablement (TPD), trauma, and income protection.
Whilst it made some findings about how life insurance claims handling could improve, it also concluded that approximately 90% of insurance claims in Australia are paid in the first instance with around $8.2billion in net policy payments made in the year ending 30 June 2016.
Significantly, however, ASIC found that there were much higher rates of rejected claims when insurance was sold directly to consumers, without financial advice.
And let’s face it: if there is one thing people hate more than paying for insurance, it’s not having their claim paid.
The ASIC report also found that rates of declined claims were highest for TPD cover (average declined claim rate of 16%) and trauma cover (average declined claim rate of 14%).
Getting it over the line: how financial advisers can help
One of the benefits of working with expert advisers is that we consult with the insurance providers regularly so we understand their decision making and claims management processes and policies intimately. We know what questions to ask and we have established relationships with people in the insurance industry, which can help cut through the noise and the red tape.
Advisers can also act as your right hand woman or man and confidante, in fighting your cause and making sure legitimate claims are recognised and paid.
As reported in AFR in 2015, business owner Sharon Williams secured her life insurance policy through her financial adviser and just five months later she was unfortunately diagnosed with breast cancer. Because she was making a claim in the first six months of the policy, the insurance company put her through the ringer and called the claim into question.
Sharon told AFR that it was the “sheer persistence” of her financial planner that got the claim through and resulted in payment. This helped cover her medical procedures and associated costs as well as a range of alternative treatments, supplements and dietary changes and payments to staff, who provided work cover during her employment absences.
“It gave me a different perspective of the whole experience,” said Sharon. “It made me think something good can come out of something really awful. I had to take time out of my life and it was a huge distraction.
Don’t be afraid of the ‘F’ Word! When it comes to insurance, the right kind of financial advice can save you thousands of dollars and an inordinate amount of stress if you need to make a significant claim one day.
Make sure you use a professional financial planner to get the maximum benefit out of your policy (and the appropriate payout when you need it). If you do claim on your policy, a planner can also help you invest your payout wisely, minimising your tax and maximising your quality of life for the future.