With all that’s going on with the royal commission, FASEA and our industry under a microscope, life insurance claims are still being paid. Why? Because someone has done their job.
Risk advisers have given advice that has meant a large number of Australians have life insurance, income protection insurance, trauma insurance, and total and permanent disability (TPD) insurance and claims are being paid to them in their time of need.
According to APRA data, over $8.5 billion in life and disability claims were paid to Australian consumers (your clients) in the year ended 30 June 2016. Of even more relevance is data in the May 2018 APRA and ASIC joint release on new life claims. There it is reported that 98 per cent of all death claims on individual advised policies were paid out, whereas only 88 per cent of individual non-advised policies were paid out. For TPD claims the discrepancy is greater – 86 per cent of individually advised policy claims were met as opposed to 67 per cent of individual non-advised policies.
If not for these advisers, many life insurance policies would not exist. If not for these advisers, even people who are the beneficiaries of life insurance might not be paid the claims they are entitled to because they don’t know how to make a claim, or, in their hour of need, they don’t have the resilience to persist with a rightful claim if it’s contested by a life insurer. If not for risk advisers, there would be an even greater social security debt, an even greater burden on other Australians.
But in the face of such pressure on our industry, it’s understandable that advisers are losing heart. There are so many uncertainties – what will the future look like? In my 50 years in this industry, I have never seen such uncertainty. What will be the repercussions of the royal commission? Will future education requirements be so onerous that most risk advisers, who currently deliver great outcomes to clients, fail them?
Are the education requirements currently under consideration being drafted to ensure that life insurance advisers fail? It’s difficult to think otherwise when specialist risk advisers will likely be required to sit the same exam as financial planners, despite the two being quite different disciplines.
It’s difficult to think otherwise when the proposed exam is four hours long, when it’s closed book, when, if you fail it three times, you’re out. But most of all, it’s difficult to think otherwise when 30 per cent of the exam will be on chapter 7 of the Corporations Act. Chapter 7 outlines financial services and markets, is 500 or more pages long and includes many sections that are not relevant to the day-to-day work undertaken by risk advisers.
No amount of irrelevant further education changes the way life insurance advice should be delivered to Australians – and that is, giving people advice that takes into account their specific risk insurance needs and protecting them and their families against life’s uncertainties.
But in the face of ongoing uncertainty and unreasonable demands, many professionals who have been delivering great risk advice for many years and have secured great outcomes for their clients will throw up their hands. They think it will all be too hard. They will listen to the doomsayers and believe risk advisers will become extinct, wiped out by excessive education requirements and overzealous regulation. But we must also be very aware of self-fulfilling prophecies.
Let’s not engage in rhetoric that sends us to our doom, let’s continue to operate and let’s continue to deliver great service to the people of Australia, despite the prevailing conditions. And instead of living our professional lives in fear, let’s continue to work on influencing the people who make decisions about our industry, so that we can at least play a role in our own future and hopefully arrive at sensible, workable solutions.
Don Trapnell is director at Synchron
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