In March, ifa reported that ASIC would conduct a wide investigation into claims handling following the CommInsure scandal.
In an announcement today, ASIC said it has found “a clear need for public reporting on life insurance claims outcomes at an industry and individual insurer level”.
While the review did not find evidence of cross-industry misconduct, it did identify issues of concern in relation to higher claims denial rates and claims handling procedures.
For instance, there were higher claims denial rates in relation to insurance policies sold direct to consumers with no financial advice, compared to policies sold through advisers and group insurance policies, ASIC said.
The rates of declined claims were highest for total and permanent disability cover (average declined claim rate of 16 per cent) and trauma cover (average declined claim rate of 14 per cent).
There was also a “considerable variation” in declined claims among insurers, with TPD denial rates being as high as 37 per cent and trauma up to 25 per cent for some types of cover.
The most common types of life insurance disputes were about the evidence insurers require when assessing claims (including surveillance), and delays in claims handling, the review found.
In an effort to improve claims handling standards, ASIC has established with APRA a new public reporting requirement for life insurance industry claims data and claims outcomes.
“To improve public trust, there is a clear need for better quality, more transparent and more consistent data on life insurance claims,” ASIC said.
“ASIC and APRA will work with insurers and other stakeholders over 2017 to establish a consistent public reporting regime for claims data and claims outcomes, including claims handling timeframes and dispute levels across all policy types. Data will be made available on an industry and individual insurer basis.”
The six-month review examined 15 insurers covering more than 90 per cent of the market. It analysed three years’ of data on the four major life insurance policy types: term life cover, TPD, trauma, and income protection.
When a claim is not paid, it’s not only the anger and disappointment of not getting the payment that was due, but also the feeling of being ripped off at having paid premiums to the very insto that now refuses to pay.
How about 71% Higher declined claim rate than retail policies…Is that large enough?
Maybe we should get Mr Trowbridge to investigate this – I’m sure he can work out how to blame advisers for it.
Wow, no surprises there!! Advised insurance policies lead to better outcomes at claim time, who’d have thought that?
And it will only get worse under LIF as fewer consumers are able to access affordable insurance advice.
The reason TPD claim denial rates are so high is because it is often the only type of disability insurance held by people who haven’t received insurance advice. As Adele Ferguson’s Four Corners story highlighted (albeit unintentionally), many denied TPD claims are for people who don’t actually meet the TPD definition, but would easily have been able to claim on income protection if they had obtained adequate IP cover.
…and there it is ASIC have just unveiled for themselves the sole reason that the Insurers are colluding against the advisers. How does this benefit the insured public. It simply doesn’t.
“For instance, there were higher claims denial rates in relation to insurance policies sold direct to consumers with no financial advice, compared to policies sold through advisers and group insurance policies, ASIC said.” No kidding?
It’s not actually that large of a gap. From the report:
“The insurers’ data we reviewed indicated that average declined claim rates were highest across the industry (for all products) for non-advised policies (12%), compared to group insurance (8%), and retail policies (7%).”
They also state that on average, regardless of distribution method, 90% of claims are paid.
Well direct is declined 71% more than advised and group is declined 14% more than advised. To me that’s a positive for advised insurance, in addition to the fact that for many clients the option of advised insurance is actually cheaper for them. Better outcomes at claim time and lower premiums, what a great outcome.
Susie “It’s not actually that large a gap” Really??
If there were 100,000 new claims in a year then the difference of 5% in declines would be 5,000 clients who don’t get paid and are filthy with our industry.
What’s the saying? Someone with a good experience will tell 10 people and someone with a bad experience will tell 100 people (or maybe whoever they meet forever). It’s no wonder with some of these levels of claims declines why this industry has a bad name
I will assume that you are not an insurance adviser as I would be very unhappy if one of my many client claims was declined and my client was left financially devastated at their time of need,
Providing professional advice and delivering much needed money at claim time is what my business is all about and it is also extremely satisfying on a personal level.
I just fight every day to have my clients be part of that additional 5% that are paid by providing advice. They don’t need the stress of paying for a policy that “might” pay out (or might not) for an additional 5 in every 100 people.