Income protection (IP) is an essential form of insurance for most professionals, and statistics show that consumers are more likely to receive their claims, and less likely to end up in a dispute with an insurer, when buying IP insurance through a financial adviser. Recent data from the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) reveals that IP claimants who were advised enjoyed 95 per cent of their claims being paid, compared with 83 per cent in the non-advised channel.
Specialist risk advisers can offer technical skills and product knowledge that ensures a policy fits within the consumer’s circumstances and lifestyle.
Financial advisers can work with clients to understand the coverage level that they need based on their own personal situation. A financial adviser can tailor coverage to exactly fit your needs, taking into account your income, dependents and any debts you have. While it’s easy to say that you need IP cover, it’s much harder to accurately calculate the exact amount of insurance that you need.
If you don’t buy through an adviser, you risk underinsurance – that is, not gaining enough coverage to meet your financial needs. This is a widespread problem in Australia as many people simply do not realise the level of cover they need if they can’t work due to sickness or injury.
Insurance can be a very complex area and it can require a lot of financial analysis and knowledge of products on offer. Financial advisers have the technical competence needed to understand the finer details of insurance policies, of which there are many.
It is these technical skills that people rate highly in the adviser-client relationship, as revealed by a white paper from the Association of Financial Advisers (AFA), ‘The Trusted Adviser: Honouring the client at every turn’.
A financial adviser can also help a client determine what kind of premium payments will work for their situation and answer important questions, such as whether the client can take advantage of options like up-front or multipolicy discounts. Again, this comes through experience as advisers know what sorts of products and discounts insurance companies are offering.
Importantly, a financial adviser can help you gauge the tax implications of buying life insurance and which parts of premiums are tax deductible. This is important to understand as there are different ramifications for policies bought inside and outside superannuation.
Additionally, an adviser can assist clients to understand any previous health conditions that they may have to disclose or that may affect which insurance cover they choose, as well as guiding the client through any paperwork or medical checks that are required.
Finally, we come to the crux of the insurance process – claim time. Making an insurance claim can be a very stressful process if you don’t have an adviser to advocate on your behalf, as advisers can act as your representative before the insurer and push for your claim to be paid as quickly and efficiently as possible.
It is a fact that public perceptions of the insurance industry are overwhelmingly characterised by a lack of trust and a belief that insurers lack transparency and are too focused on profits. The widespread negative media coverage in relation to insurance companies finding ‘loop holes’ to avoid paying claims has coloured perceptions, according to the AFA white paper, The Value of Protection: Creating an advocate for life.
The paper finds that financial advisers can facilitate the relationship between the consumer and the insurer to help create an easy and efficient claims process that optimises the outcome for their clients.
“The consumer needs confidence that the insurer will deliver on the promise of the contract, and it is the adviser’s role to build that confidence from the time of sale, throughout the life of the policy, and most definitely at claim time,” the AFA says.
So, there are several reasons clients are better off buying risk insurance cover through financial advisers. Better outcomes are much more likely with an adviser by your side, because advisers can not only advocate for faster processing of a claim – they can also ensure the right policy settings for your insurance cover from day one.
Michael Pillemer, chief executive, PPS Mutual
Good luck navigating the claims process without an insurance specialist behind you. Not many financial planners would have the time let alone skills or knowledge to push through the entire process, stop the bullying tactics by the claims team and shut down their little games that will be played.
Even as an adviser I wouldn’t handle it myself and would engage a claims advocate who knows what he’s doing.
Only risk advisers and the clients we have helped through the whole practice know this. It is a pity that the powers that be allow these financial products to be sold direct to the public under “general advice” which is pretty much the same as full advice but without client protections provided by a the Know you client rule the SOA and Best Interests Duty. I find it amazing that an adviser who changes a clients policy to a better one has to spend 4 hours on compliance whilst a General Advice sales person can change a clients policy to their employers junk policy without any compliance training or need to work in the best interests of the client.
Life, Trauma, TPD and Income Protection should only ever be sold through FASEA trained advisers who are compelled to work in the best interests of their client, and protect clients with SOA’s etc.
Currently there are dealer groups allowing air conditioner sales people and car sales people to sell a range of insurance policies from a range of insurers after completing a 2 days General Advice course. A friend attanded one of these courses and said that the “advisers” in the room were encouraged to be imaginative when running through the applications if the client was a bit unhealthy as they would not be paid if the application was rejected. It was explained that this was ok as it was only general advice and all the client’s decision. The “advisers” were instructed not to look in to the clients current situation or current insurances as if they knew too much about the client then they wouldnt be able to justify their sales when caught by the regulators when things ineveitably go wrong.
Freedom insurance is just the surface. Real Insurance and Insurance line should never have been allowed to exist. But…. at least with these companies the client has a recorded conversation and a big insurer to go after when everything goes wrong.
The dealer groups who are licensing anyone to sell insurances with no training or experience under general advice are the real problem. Its just a pity that ASIC are ruining the lives of so many people by allowing this sales process to flourish.
Why dont they ban commissions for every Insurance Sale which was not completed with the full protections provided by a qualified and experienced independent adviser who has done a full fact find, knows their client’s current situatuion, has completed an SOA and complied with the Best Interests Duty.
And ban the churners who everyone in the industry could point out straight away.
It would be that easy to clean up this industry
Shame the adviser won’t be able to provide the advice to “normal Australian’s” in a profitable manner from 2020, if not 2019 given it is at best marginal at present.