Life/risk claims handling the key
While much attention has focused on adviser remuneration over the past two years, insurance claims handling has deserved equal scrutiny.
When Money Management in 2015 conducted a thought-leadership breakfast examining the implications of the Trowbridge Report, a number of life/risk advisers complained that the suggested remuneration changes gave too little recognition to the manner in which advisers help clients handle claims.
What became obvious in the debate around the Trowbridge process was that many life/risk advisers saw their role as being not only to find their clients the most appropriate insurance product for their needs, but to help those clients navigate the claims process should some mishap occur with the latter process not reflected in their remuneration.
It followed that those same advisers were, at that time, less than enamoured with some of the direct insurance offerings being brought to market by some of the major insurers, arguing that problems were likely to arise at claims time.
The reality of most people seeking to obtain life/risk insurance in Australia today is that they have three main means of doing so — via a financial adviser/planner, direct to the insurance company or via a group insurance arrangement provided by a superannuation fund.
For most of the past decade, Money Management's sister publication, Super Review, has conducted a survey within which it has sought to determine what superannuation fund executives believe is the most important deliverable with respect to group insurance — without exception, claims-handling has been at the top of the list.
Regular Money Management columnist and principal of Integrity Resolutions, Col Fullagar, has also consistently reinforced the need for better claims-handling by insurers, arguing that sometimes the greatest trauma encountered by accident victims actually involves dealing with the insurance companies themselves.
So the major insurers such as CommInsure, TAL, AIA, MLC, AMP and Metlife should have been well aware that their claims-handling practices were under scrutiny and that, in the case of group insurance, those practices could prove a game-breaker when it came time for superannuation funds to review their insurance providers.
All of which serves to highlight the damage being suffered by CommInsure as it seeks to deal with reports published by Fairfax Media and the ABC on the manner in which the Commonwealth Bank's insurance arm dealt with insurance claims.
The Financial Services Council (FSC) last week sought to defend the state of the life/risk industry, its evolution to be more consumer-centric and the impending introduction of a code of practice, but the fact remains that most of the attention directed towards the life/risk industry has been focused on issues around adviser remuneration rather than either product development or claims-handling.
When the Australian Securities and Investments Commission (ASIC) issued its report highly critical of the life/risk sector, it focused on adviser remuneration leaving it to the Australian Prudential Regulation Authority (APRA) to consider the mistakes and mis-steps which served to seriously erode insurance company bottom lines from 2012 through to 2015.
Anyone who has worked within an insurance company understands the degree to which claims-handling rigour can be a reflection of the prevailing commercial circumstances and everyone who has been a part of the life/risk sector in the past decade has been well aware the increasing claims experience which followed the global financial crisis and the way this was handled by the companies.
The balance sheets of the insurers have been improved by premium increases, a tightening in definitions and, sometimes, a more pragmatic assessment of how claims should be handled.
Talk to Col Fullagar and you will learn that while CommInsure has been most in the news about its claims-handling procedures, it is not the only insurer with whom he has encountered problems. In his view, there are some equally deserving of scrutiny.
Reports early last week suggested the CommInsure issue was being reviewed by ASIC. Some would argue that process should have been part and parcel of the processes which gave rise to the Trowbridge Report and, ultimately, the Life Insurance Framework (LIF).
Recommended for you
When entering paid employment, it’s not long before we are told that we’ll need to lodge a tax return but there are times when a person will be excepted.
Anna Mirzoyan examines how grandfathering affects income support payments and how factors such as paying for aged care can impact them.
There are specific requirements that only apply to trustees of self-managed superannuation funds, writes Tim Howard, including the allocation in their investment strategy.
Investments bonds offer a number of flexible, tax-advantaged benefits, writes Emma Sakellaris, but these are often overlooked as old fashioned when it comes to portfolio allocations.
