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Claims by Advised Clients Generally More Likely to Suceed

APRA’s latest life insurance claims and disputes statistics publication appears to reinforce that advised clients are more likely to be paid for death, TPD and Disability Income (Income Protection) claims.

APRA’s data on the admittance rate by cover type and channel for the 12 months to June 2020 shows that individual adviser cover for death was paid 96% of the time compared with 89% for individual non advised.

Advised cover is when a client obtains their insurance from a fully qualified financial adviser. Non advised cover is for insurance cover that is taken out within super, over the phone or internet with a direct insurer such as Real Insurance or through another avenue that does not involve a financial adviser. These statistics reinforce the need to take out fully underwritten cover through a financial adviser.

APRA also reported that advised TPD claims were 81% paid compared with 61% for non advised claims.

For Disability Income (Income Protection) advised clients recorded 94% compared to 85% for non advised clients.

A statement from APRA says the data is the product of a ”world leading” joint project between the authority and ASIC, aimed at making it easier to compare life insurers performance in handling claims and disputes.

In it’s executive summary to the full report APRA notes that generally, individual advised business shows higher admittance rates than individual non-advised for the same type of cover.

Another point for clients to consider is the potential cost of claim assistance. Generally clients who have a retail insurance policy through a financial adviser will receive claims assistance for free. Clients who have cover through their super or through a direct insurer may need to engage the services of a Lawyer to help with the claims which erodes the amount of cover payable should the claim be successful.

 

*The information within is general advice only, prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs

Life stages- Which insurance is right for me?

Life insurance is an important investment, but different types of coverage can deliver even better value at different points in your life.

Many of us put off thinking about life insurance until we’ve achieved a particular milestone in life such as buying a house or having children. Whilst these are no doubt important times to review your life insurance needs, life insurance is about more than just big game-life changing moments. By looking into coverage that’s suitable for you today, you’ll also be able to make smart decisions for the years ahead.

Getting ahead while you’re young

Your twenties are all about finding your place in the world. It’s a decade when you’re moving out of home, navigating the first steps of your career and travelling the world. While taking out life insurance so young might seem unnecessary to some, it can be a wise decision for others.

People in there twenties should also consider Income Protection and TPD insurance if they are  earning an income. Trauma insurance is also another type of insurance to consider as well as life insurance depending on the individual’s personal situation.

Getting your insurance cover organised while you’re young and fit means you’ll be able to avoid any loadings or exclusions which may hinder you when you’re older and medical conditions are more likely to be a problem. Taking out cover whilst young also means that ‘level premiums’ may be more suitable in order to save money on insurance premiums down the track.

Settling down and protecting your loved ones

Your insurance needs will probably change when you’re in your thirties, as this decade is when most people start settling down. According to the Australian Bureau of Statistics, our early thirties are when we’re most likely to get married and have our first child. Once these ‘life events’take place it is a good adviser to seek advice from a financial adviser who can customise your insurance to meet your needs and help provide financial security.

Planning for retirement and beyond

The prospect of retirement is on the horizon, sound financial advice is key to setting you up financial for the years ahead. While you may be looking forward to having fewer day-to-day responsibilities and expenses, there are still benefits to having life insurance in place in your golden years. 

Maintaining a life policy so that you can leave money for your partner after you die- a key part of estate planning- is a common reason retirees retain life insurance. Other circumstances that may encourage you to keep some cover in place may include the need to provide for dependents, setting aside money for your funeral or the desire to cover any outstanding debts.

 

The information within is general advice only, prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs

 

What questions to ask a financial adviser

Before you take out life insurance, make sure you ask the following questions with your financial adviser. Also remember that a lot of the online quoting sites provide general advice only. Our staff are qualified to provide financial advice and are qualified financial advisers that specialise in risk insurance.

  • What types of cover do i need?

Deciding what you need cover for is important. You can start off by asking yourself  (and your adviser, of course) can i do without these types of insurance?

Life cover: Pay’s a lump sum amount in the event of death or terminal illness. This is to cover such things as living expenses for your dependants, pay off debts, funeral costs, children’s schooling costs etc. A financial adviser will help not only with determining a suitable insured amount, but also how best to set up the policy and the possible tax implications on dependants.

Total and Permanent Disability (TPD) cover: This pays a lump sum should you become totally and permanently disabled and unable to work. TPD cover can help to pay out of pocket expenses, ongoing medical expenses, home modifications and to care of dependants if needed. A financial adviser will be able to explain the difference between own and any occupation.

Trauma cover: Also known as Crisis cover with some insurers. Trauma/Crisis cover pays a lump sum on the diagnosis of a serious illness or injury (eg heart attack, stroke or cancer). This amount can help with any medical costs associated with a Trauma/Crisis condition or help with an extended break from work. A financial adviser will be able to provide advice on what types of Trauma cover is available as well as additional extras such as reinstatement, life buyback, Trauma stand alone etc

Income Protection: Pays a monthly benefit to replace your income, if you are temporarily disabled and unable to work. You will need to determine how long you wait for the first payment should you be on claim (this is called the waiting period) and for how long you are paid (this is called the benefit period). Your financial adviser will also need to make sure your income is enough to justify the insured amount.

  • How much cover do i need?

When it comes to life insurance, everyone’s needs are different. Working out how much cover you need is as easy as sitting down with your financial adviser and determining a figure that is right for your personal situation. Your financial adviser will then assess the right amount of cover for you based on your personal circumstances including: your total debt position, income, assets including superannuation and property plus your family circumstances such as education and childcare needs.

  • How long do i need to be protected for:

Nobody knows what the future will bring. That’s why it helps to plan ahead. You should start your insurance relationship with an expectation that your insurance needs will be continually adapted to your needs. The rule of thumb is that your need for financial protection decreases over time. For example, if you pay off your mortgage,reduce debts and no longer have dependants to look after financially, you may wish to review your cover.

You should keep your policy as long as you require financial protection. A good financial adviser should review your policy every 12 months to make sure the insured amounts are still suitable and to make any changes should your situation change.

  • What should i look out for?

Buying life insurance isn’t difficult, but it does take some thought as well as comprehensive research. There are many companies online offering their services but it is important to take time to consider your choices and always make sure you:

-Are aware of injuries/illnesses the insurance covers

-Work closely with your financial adviser to understand your personal needs,objectives and financial situation

-Understand how your medical history/occupation/pastimes will influence your cover and potentially how much you pay

-Beware of shortcuts. Some direct insurers do not cover for things such as mental health, injuries whilst being intoxicated etc.

-Understand your medical history so you can disclose everything to your financial adviser. That way you’ll make sure the cover is right for you and there will be no issues should you need to make a claim.

-Be aware of the ongoing cost. Ask your financial adviser to provide you with a future forecast of premiums. This is so you can plan how you will pay your insurances in the years to come.

  • What is the best way to pay- stepped or level premiums

Insurance premiums will generally increase over time-simply because your health risks increase with age. Most insurers offer two common ways of paying, and managing, the costs of your insurance over time.

Stepped premiums- This means each year as your policy renews, the premium increases. This means your premiums will get older as you age

Level premiums-These are more expensive upfront but generally cheaper over the life of the policy (depending on the age the level premium is taken out). A level premium won’t increase yearly with age although is not guaranteed to stay the same as insurers can increase both level and stepped premiums out of cycle.

A good financial planner will be able to advise whether a stepped or level premium is most suitable for your situation.

Want to know more?

If you would like to discuss any of the content in this article and how it may apply to you, please fill out our contact form online or call us on 1800 737 926.

 

*The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

 

Frequently asked questions about life insurance security

In uncertain economic times, coupled with life insurance companies changing ownership regularly, some policy owners have asked what that status is of their life insurance portfolio. Below are some answers to questions that every financial adviser will be asked at some stage in their career.

  • I have an existing policy-Will I lose cover if the insurance company I’m with goes out of business? NO- under legislation another insurer will take over this policy and continue the cover as long as the premium continues to be paid
  • If I keep paying an existing policy right now could I ‘lose’ the premiums? NO– The only way to ‘lose’ premiums is if you make the mistake of allowing your policy to lapse. You then lose the value of your policy being a guaranteed renewable ‘contract. This would be a very dangerous thing to do as you may be unable to re-apply for insurance later if the status of your health has changed.
  • If I make a claim will the insurance company charge me more for my premiums next year? NO- Unlike general insurance companies, life insurers cannot charge an additional premium just because you have had a claim with them.
  • What if I happen to be in the middle of a claim and my insurance company goes out of business? The legislation directs that your claim in progress will be transitioned to the new insurer
  • If another insurance company takes over my policy can they change the terms I currently have? NO-The new insurer is bound by the terms of an existing pure risk contract, including any acceptance terms. They cannot change the policy definitions nor can they add any exclusions etc.

In recent times AMP have sold their life insurance business to Resolution life, Zurich have bought Onepath, AIA have bought Comminsure and the list goes on. Hopefully the above helps with any confusion to those who have a life insurance policy (including TPD, Trauma and Income Protection) and are unsure of any implications this may have of their policies. If you have a life insurance policy in place and you’d like to discuss it further please don’t hesitate to get in touch by clicking the contact us button or by filling out our online form.

 

. The information is general in nature and should not be considered as personal advice

Life insurance claims data

The FSC & KPMG have recently released claims data relating to the life insurance industry in 2019. The data is split across gender and the proportion of claims paid.

The data demonstrates how important life insurance is to the Australian community especially given the prevalence of cancer, mental health and accident related claims.

These figures hopefully dispel the myth that insurance companies don’t pay claims.

Key observations:

Life (97% of claims paid)

-Cancer was by far the number 1 cause of death claims in men (39%) and women (61%)

-Accidental death is much more prevalent in men (20%) than women (7%).

TPD (90% of claims paid)

-Mental health comfortably tops the list for men (24%) and women (27%)

Income Protection– (95% of claims paid)

-Accident is the top cause of claims for men (38%) and women (28%)

-Mental health was only fifth on the list for men (10%) but a clear second for women (22%)

Trauma/Critical Illness (86% of claims paid)

-The highest cause of claim was cancer at 58%

Life insurers paid out over $12 billion dollars in claims in 2019 and this is expected to rise in 2020/21 as we further realise the impacts of Covid-19.

 

 

 

 

5 things you need to know about life insurance

Life insurance offers important protection for millions of Australians, making it critical to understand the benefits as well as the latest news.

Life insurance comes in many different forms such as life cover, Trauma/Critical illness insurance as well as Income Protection and Total and Permanent Disability. Each of these play an important role in protecting you and your loved ones when it is needed most.
Unfortunately many people remain unsure how much life insurance they need. Throw in constant regulatory change and many Australians may not have the cover they assume they have or some may even be holding back on purchasing life insurance.

Below are 5 things we think you need to know about life insurance.

# 1 : People making life insurance claims are younger than you think

The average claim age for life insurance is only 66 years for men and 63 years for women, according to data provided by life insurer Clearview.
This shows the importance of insuring against the unexpected, whether that be a terminal illness or death due to an accident or illness.

# 2: Insurance claims involving advisers are more likely to be accepted

A comprehensive 2016 life insurance survey by the corporate regulator, Australian Securities and Investment Commission (ASIC), found claims were denied in just 7% of claims when a financial adviser was involved.
Life insurance claims through a superannuation fund (known as group insurance) were declined in 8% of cases while direct life insurance (sold through a call centre or over the internet) were declined in 12% of cases. One insurer via direct sales declined 29% of claims while one insurer via a superfund declined 23% of claims suggesting a skilled financial adviser can be invaluable not only to ensure you have the right amount of cover in place but to ensure the cover is provided through a reputable insurer with a good claims record.

# 3: Most life insurance claims are processed quickly

More than 130,000 life insurance claims were processed in 2017-2018 by the major insurers that have signed up to the new life insurance code of practice.
The industry reported that 89% of income related insurance claims were decided within 2 months whilst 92% of non-income related claims were decided within 6 months.

# 4: New legislation may close your insurance if it’s attached to super

From July 1, 2019 super accounts with insurance that are inactive for 16 months have had their insurance cancelled.
Many superannuation funds automatically include life insurance, unfortunately many people are unaware that they have it or have not taken the time to consider whether the amount of cover is sufficient.

# 5: Life insurers want a regulatory overhaul so they can offer rehabilitation benefits

Employment provides people with the money they need to support their lifestyle. However, those who are incapacitated and unable to work lose more than just an income, it can also dent their self-confidence and happiness.
Life insurers are lobbying for change to legislation which would allow them to fund treatment for Australians at risk of long term incapacity where they are not covered by private health insurance or stuck on public healthcare waiting lists.
Research suggests such reforms could benefit up to 10,118 people per year while 87 people could be prevented from becoming totally and permanently disabled. Early intervention by insurers could also cut return to work times from 18 to 13 weeks.

Income Protection under super during Covid-19

As the economic impact of Covid-19 continues to emerge, one thing superannuation members must be careful of is how their Income Protection policies will be affected should the need to claim arise. This is especially important for clients who have Income Protection which is owned under super. This applies to both group insurance and retail Income Protection policies that are wholly paid for from superannuation.

To have an Income Protection benefit (sometimes called salary continuance for group cover) paid under super, that member must meet a condition of release. For Income Protection policies that condition of release is ‘temporary incapacity’. Temporary incapacity means that the member has ceased employment due to injury or illness. This means that if the member/insured person is unemployed at the time of suffering illness or injury they will not meet the ‘temporary incapacity’ condition of release as the illness or injury is not the reason for ceasing employment. And therefore no claim can be paid.

With unemployment levels expected to rise significantly due to Covid-19, this may impact a number of people.

Most retail insurers now offer the option of paying a small portion of Income Protection outside of super. This means the should the need for a claim arise the superannuation trustee does not have to get involved nor does the insured person have the meet the conditions of release.

Whilst there are both advantages and disadvantages to owning insurance through super, it is important to make sure the policy is set up correctly.

. The information is general in nature and should not be considered as personal advice

Coronavirus and Life insurance

As the well know coronavirus sweeps across the world, it continues causing major disruptions to the way we live. Given the amount of enquiries we have had from existing clients as to whether they would be covered, I thought I would clarify a few points to give both clarity to existing clients and people who are currently searching for the right Life Insurance, Income Protection etc for their needs.

Protectinsure works with a range of life insurance companies who have clarified their position in terms of what is and what isn’t covered. One clear point they have made is that retail life insurance policies do not have an exclusion on pandemics. Any exclusion that applies to a policy is agreed to by the client before the policy starts by way of signing an exclusion letter (otherwise known as a special acceptance letter). This applies to all retail risk insurance policies including Life Insurance, Income Protection, Trauma insurance, TPD insurance and Business Expenses insurance.

For Income Protection policies one thing to remember is the most common waiting period is 30 days. Whilst existing retail policies are covered for coronavirus, any new policies may be subject to exclusions and new applicants may be required to disclose travel plans to affected countries as this may impact on their risk assessment.

This information was provided to Protectinsure by a variety of insurers. This is general in nature.

The End of Agreed Value Income Protection Policies

Whilst many people may not understand the importance on Agreed Value Income Protection, it is an important feature especially for self-employed Australian who tend to have fluctuating incomes.

Disability insurance (commonly known as Income Protection) in Australia has recorded losses of over $1 billion over the past 12 months across all insurers. This takes the total losses to over $3.4 billion in the last 5 years.

The Australian Regulatory Authority (APRA) has proposed the following changes:

-Avoiding offering Income Protection policies with fixed terms and conditions of more than 5 years.

-Ensuring effective controls are in place to manage the risks associated with longer benefit periods

-Ensuring Income Protection benefits do not exceed the policy owners income at the time of claim

-Ceasing the sale of agreed value Income Protection policies

APRA have said that there is now a genuine risk that risk insurers may start withdrawing from the market hence the proposed changes.

What is Agreed Value Income Protection?

Agreed value means that the insurer has endorsed your insured value (monthly benefit amount) so when it comes claim to claim there is minimal to no financial information required. The insurer will go on your income at the time of taking out the policy. Of course a medical professional will still have to sign off that you cannot work due to injury or illness. The other option is what is called an Indemnity contract. This is the most common contract on Income Protection policies and means that the claim amount will be limited to 75% of your income for the last 12 months (24 or 36 months for some insurers). This can be a problem for clients who are self employed and have an income that fluctuates yearly as the previous 12 months may be less than what their insured amount is. The indemnity contract will be the only option available from April 1, 2020 if APRA’s changes go ahead.

What can you do?

If these changes go ahead it’s highly likely that Agreed Value policies that went into force before March 31 will stand. Agreed Value Income Protection is not right for everyone although if you haven’t had your policies and financial situation reviewed recently now may be the perfect time.

 

This information is general in nature and should not be considered as personal advice

The Downfalls of Group Insurance through Super

Whilst default insurance through super has its advantages, it also has many downfalls that most people are unaware of.

Recently I spoke to a new client who was perplexed that his Salary Continuance  (similar to Income Protection) through Qsuper super had changed from a benefit period of 3 years to 2 years. They also increased their premiums considerably. Unfortunately for my client there was nothing he could do other than to move the insurance elsewhere as the group cover through super can be changed anytime by the insurer who has a contract with that fund. Whilst he is still healthy and was able to seek financial advice from an insurance broker like myself, not everyone is so fortunate as they may have health problems which prevent them from being able to move their cover leaving them worse off with no option to move to a better product. In this case he was able to take out a fully underwritten Income Protection policy with a benefit period to age 65 for a slightly cheaper premium than his Qsuper policy which only covered him for 2 years.

Retail Income Protection which is purchased through an insurance broker/financial adviser can also be paid for via super if this is the preferred option for the client. All Income Protection policies are underwritten before going into force and cannot be changed by the insurer as long as the premium continues to be paid. They are also non-cancellable and cannot be cancelled by the insurer except if they are not paid up to date. They are also generally tax deductible outside of super and have a maximum benefit period up to both 65 and 70 unlike Salary Continuance through super which generally only pays for a maximum of 2 years.

Whilst Life & TPD insurance through super normally provides a small amount of protection it is not enough when you consider the cost of raising a child and the average Australian home loan amount.

Trauma insurance is a policy that pays out a tax free lump sum amount on the diagnosis of a trauma event such as cancer, stroke, heart attack etc. Trauma cannot be taken out within super but can be attached to retail life insurance policies whether they are paid for via super or personally by the insured.

Whilst group insurance does have a role to play protecting people who otherwise wouldn’t seek financial advice, it has many disadvantages and is inferior to a fully underwritten retail life insurance policy.

If you have insurance through super and would like a review please give us a call on 1800 737 926 or email info@theinsurancequoter.com.au

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