Data jointly released by ASIC and APRA on Tuesday revealed the claims and dispute ‘ratios’ across each life insurance sales channel for the 12 months to December 2019, with the claims ratio defined as the dollars paid out as a percentage of total premiums paid, and the dispute ratio defined as the numbers of disputes per 100,000 people insured.
Maurice Blackburn super and insurance principal Josh Mennen pointed out that the ratios were significantly more positive in group insurance than through the advised channel, which in his view revealed that insurance through super delivered superior consumer outcomes.
“The data shows that the claims paid ratio for super total and permanent disability insurance was 85 per cent, compared with 45 per cent when sold by financial advisers,” Mr Mennen said.
“It also shows that income protection through super led to just 33.7 disputes per 100,000 people insured, compared to retail income protection policies, which came in at a staggering 150.5 disputes per 100,000 people insured.
“This reinforces that while adviser-sold policies are often marketed as a bespoke product, too often they are compromised by conflicts of interest, including insurers paying trailing commissions that result in poor product selection and claim disputes caused by underwriting complications.”
Mr Mennen said the statistics showed that while group insurers had made progress in terms of claims acceptance rates and processing times, advisers still had a way to go to repair the reputational damage their industry had suffered.
“The financial planning industry must explain why, based on this data, consumers appear to be worse off when they consult a risk adviser,” he said.
“It also must outline how it is going to ensure insurance recommendations are genuinely in consumers’ best interests in order to win back public confidence.”
Annnnnnnnnd we all know what happened last time a lawyer opened his mouth! And the fallout from that will be felt for years to come….
What a leech. If I ever got taught ethics and providing value for money off an ambulance chaser I would probably be rich or in jail.
There is simply not enough information in the two ratios provided to draw any conclusions. It reeks of cherry picking.
As others here have mentioned, there are some significant differences between group cover vs fully underwritten retail cover including trauma cover, TPD cover that actually does what TPD cover is supposed to do (without the dreaded ‘retraining clause’ that exists in all – or nearly all – group insurance schemes) and not to mention the fact that advised retail cover is fully underwritten at time of application with a contract that cannot be altered by the insurer once in force and premiums are paid. The same cannot be said for any group cover.
Those who have properly underwritten high quality retail cover under advice by a planner with experience in risk insurance will always have a better financial outcome than those who just hope for their group cover to do the right thing by them. I’m curious to see if there is any statistically meaningful data about advised clients vs non advised clients that contradicts what I have said in this paragraph.
Ambulance chasing is alive and well
Another blood sucking ambulance chasing lawyer who has absolutely NO CLUE.
IN April 2018 I wrote
The reason I find this interesting is that I now know solicitors charge about $6,000 per policy to fill out the paperwork for a claim. In the instance I am referring to the guy had a brain injury. There was no argument as to whether he would be paid or not he just needed assistance to fill out the paperwork. However, one insurer did drag the chain, so they then wanted a further $5,000 to write a letter to hurry them up. This is when the brain injured person came to us to ask for advice about if they should pay a further $5,000. Obviously even though they were all group insurance policies and we had not received commissions we assisted them with the unhurrying up of the third claim for free. The Industry Super fund member received a total of about $260,000 of which he lost about $24,000 to the solicitors to fill out the paperwork including $6,000 to cover photocopying, phone calls, postage and other sundries netting him approximately $236,000.
We then charged him $2,200 to advise on how best to ulitise his claim proceeds, but if he had come to us in the first place we would have charged $3,300 and assisted him with the claim. That is a $25,000 difference which is a lot to a person who has received about a quarter of what he needed.
I could understand this if there were issues with the claims, but there was not. Due to a brain injury he just needed assistance with helping fill out the paperwork. Why did he go to a solicitor rather than an insurance adviser or a financial planner? The adds on tv run by solicitors telling him that they will help him.
Why are insurance advisers and financial planners not running the same adds? We are too busy seeing a client, analysing what they have and what the shortfall in needs is, preparing workpapers and numerous quotes to cover all sorts of comparison requirements, writing a Statement of Advice to explain that we are going to receive some income if they accept our recommendation to be covered and if they can’t afford adequate cover, what trade offs and considerations we have made.
Don’t get me wrong I have been writing Statements of Advice for over 20 years and have no problems putting in writing what we have recommended and why and what we will get paid if they accept our recommendations and we can find an insurer who will cover them.
It has just got out of hand in recent years, there is so much more needed than this to cover a whole heap of compliance requirements that add no value to the client or to a quality advisers process.
No system is perfect but continuing to make it more difficult for quality advisers that have passed all sorts of compliance tests is not the answer.
Toughen up on group insurance, toughen up on the unethical adviser, toughen up on solicitors who now see claims as their easy picking grounds and free up the time for quality advisers to do what they have always done ie to look after the financial needs of Australians.
Great comment Lee. Perhaps the government could restrict solicitor activities in insurance claims to those actually only requiring court representation, not admin/advocacy OR they too should get an AFSL if dealing with a product.
Excellent idea
Well done Lee! We had an instance where the insured had a death claim denied as a result of cancelling policy… (with another adviser). They were about to take it to a lawyer who had quoted them $50,000 (10%). We quoted $3,000 plus gst, & got the claim through with minimum of fuss, & considered we were adequately compensated….
Some great comments here laying the conflict of interest of Josh Mennen bare.
He probably makes a great advocate but I am not sure if I would want Joshua as an expert witness.
So my 100% claim success rates across IP, TPD, trauma and death cover over 12 years claim history must be an outliner? Must admit last claim we got in some experts to help (non lawyers so cost around 1% not 40%).
Good stuff mate! We’re running at 100% on retail products also…after 38 yrs in business…(Actually higher, when you consider the extra benefits sometimes paid out that were unexpected)…
These gutter Lawyers prey on vulnerable clients who feel the only way to get something rather than nothing is to engage them and then give away a significant percentage of their claim proceeds for payment of their legal fees.
The success that I have had in negotiating positive outcomes for clients over 30 years from Group Insurance claims for TPD, Terminal Illness, Life and IP has been almost 100% in the clients favour and the cost to the client has been a fraction of the legal costs and on many occasions I have charged nothing to assist someone in real need.
This is the difference when the real ethics come into play Josh Mennen.
Lawyers hold themselves up to be the justice league, fighting the good fight for those who can’t protect themselves against the corporate machine when in reality they place their own financial interests in front of their client in the knowledge they will only take a case on they expect to win and when they do, they fleece the client for grossly excessive fees because they know the client is vulnerable and know they will pay the price for some success.
The comments from this individual and the firm he represents are offensive and a disgrace.
I could set up a specialised insurance claim management practice and only deal with individual and group claims and achieve a high success rate for the clients at a fraction of the cost to the claimant these blood sucking Lawyers charge because I have 30 years of specialist knowledge in insurance policy and benefit definitions and claims assessment processes.
Sure, I cannot represent these clients in court, however, we aim to not get to that point.
I looked through the APRA data last night and this Lawyer has selectively interpreted the results in my view. Other data points:
– Life Claims declined (advised) 3.2% *
– Life Claims declined (non-advised) 11.3%
– Life Claims declined (Group, super) 1.8% Ordinary is 0.7%
So to be fair, advised declined is almost double Group, BUT…
* In the advised data, AMP and CMLA have the highest declined rates at 3.5 and 8.3% each. Excluding these, advised and Group are pretty much the same.
So the problem here is NOT the Advisers, it is the results from those two Insurers.
What a disgusting piece of self-interested rubbish by Josh Mennen. Maurice Blackburn should be embarassed by this and so should IFA for publishing it. All the stats show that the advised clients have more appropriate levels of cover in place and have a higher success rate when claiming.
How many trauma claims did the group industry pay last year???..oh yeh..zero… We had over 1.5 million paid to our clients in trauma benfits last year….But people.dont need advice to they…
How much does. a group TPD policy pay for a cancer event..oh yeh..zero…but people dont need advice do they.. Those comments almost border on advice if I am not mistaken.
I hope the public dont make a judgement call based on thaose comments or else the suers may get sued.
Maurice Blackburn are corporate lawyers trying to justify their place in the sun. Josh Mennan will find out that the claims are all small and given that the Industry funds all sell decreasing term cover his share of the pie is also decreasing. Also now that the real costs are being impacted on the ISF’s they are coming back to the pack. No one insured under 25 Josh anymore. Anything other than small no evidence of health covers are fully underwritten now.
The claims process statistics do not show how many claims were denied.
Sorry to say that these statistics indicate not much really.
Surprising the author doesn’t proffer the real reason super claims in industry funds seem to be so favourable. As for “claims ratio” well, that’s numbers being used to create a false impression as many things are factored into a premium including commission which is a service fee that clients are happy to pay good advisers – industry funds don’t have this advantage for clients.
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When a client claims through an adviser, the adviser (any GOOD adviser) pushes the claim to get it paid much more than would a consumer in a super fund. The super fund can ‘stonewall’ a member and pushing if “disputing” may seem too much trouble so the hapless member drops it. A claim that is denied is not considered a dispute as such. Only when a member complains/pushes is a dispute considered to have occurred.
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Many such ‘disputes’ do indeed occur when an adviser is involved due to the adviser having ‘client best interest’ at heart so then these so called disputes are recorded and compared to industry super dispute where clients have NO adviser to help them battle the insurer involved. You’d think Mr. Mennen at Blackburn would know this.
Hi Josh when you have finished basking in the glory of the headline you created for yourself, I could ask why firms like yours don’t care to mention the costs of your services? One recent example of $70,000 advocating a straight forward TPD outcome for a rural client springs to mind. A financial Planner would have charged less than $5,000 for the same work. Let’s also conveniently omit the fact that the total number of disputes includes cases in which the event claimed is not actually covered under the policy wording. But hey let’s not let the full truth get in the way of a great headline. It saddens me to be quietly pleased that the impact of PYS and PMIF will eventually all but shut down this source of easy money for lawyers like you. All the best
APRA also notes that disputes generally relate to old claims, and even older claim events;
any insurer that has rapidly grown or shrunk its in-force book since then may report dispute
lodgement ratios that significantly differ from the ‘true’ underlying experience. This is
particularly likely for insurers in run-off and for the Group Super channel.
Table 11 shows that more complex products have higher dispute lodgement ratios. TPD,
Trauma and DII in particular show relatively high ratios. While DII shows higher ratios than
TPD and Trauma, it also has a higher claims frequency (Table 8). Comparing distribution
channels, the Individual Non-Advised channel generally shows higher dispute ratios.
Where is the ratio for “claim funds paid to lawyers” as a percentage of total claims? bet that is really high, hey Josh. What about “average fee per claim”? Reckon that would be up there for Lawyers too, hey Josh. Based on my findings, Lawyers represent no value for claimants and they should not be involved in any claim for life insurance.
IDIOT!! “The data shows that the claims paid ratio for super total and permanent disability insurance was 85 per cent, compared with 45 per cent when sold by financial advisers,” Mr Mennen said. The report clearly states ” The claims paid ratio is the dollar amount of claims paid out in the reporting period as a percentage [b]of the annual premiums receivable in the same period.[/b]
Of course he would, they make a living off the Group Insurance claims as the Group Insurers just cave in and pay rather than fight them in the courts, whilst good advisers assist their clients through the claims process [ and don’t get 30 to 40% of the payout ]. Its time the Legal “Profession” went through the same Ethics requirements as we have to and they be force to put their client’s “Best Interests” first and have their incomes “CAPPED” as we have had imposed on us.
Well, if you look at the average sum insured per claim, for advised it is $572k and for superannuation it is just $134k. Josh Mennan fails to understand the extra costs involved to get nearly 5 times the amount of cover per policy. If he looks at the prevalence and costs of higher sums insured within superannuation he will start to appreciate and understand the flaws in his rhetoric.
What a f###t