by Jon-Paul Hale
The reality of our present environment is we have a huge amount of regulation and responsibility on financial advisers. At the same time, the providers continue to play stupid games, looking for stupid prizes.
I'm somewhat astounded by the FMA and RBNZ thermic reviews that state all is well and we don't have problems. At the same time, we find Southern Cross stealthily removing benefits without advising policyholders.
One has to ask, were those doing the reviews looking under the rocks or were they dazzled by the provider's marketing departments?
In the last 12 months, we have had a range of things hit the media on the poor behaviour of providers, including fines, and all is well?
Also, remember that the providers did most of the work, resulting in fines through their own self-reporting.
One does have to wonder what exactly is being looked at and investigated.
For now, I'll continue to light fires like a rabid pyromaniac. I've been in this industry for 23 years, 11 as an adviser, and essentially, not enough has changed to remove the BS that goes on.
This is a new one; I noted in September 2022 with AIA, and looking back, it likely dates earlier than this with their updated shiny new and simpler policy split process. (Yes, this is how it was presented.)
Nope, it is horrible, worse, and predatory.
For as long as I can remember, when it comes to policy admin, the most challenging part of a policy split for separation was getting the now-separated couple to sign the forms to split things.
I contacted AIA in September 2022 with questions and justification for this change, but I didn't get a reply.
And with the example I'm going to talk through, I reached out again recently about it, and I've also had continued silence.
What's going on?
Under the justification of unfair contract terms with the updated Fair Trading Act, AIA is forcing the upgrade of old policies on their books to new policies that meet this arbitrary requirement.
On the face of it, this sounds like a good thing, right? Not so much.
When those policies commencing 2001 to 2010 are split, they have to be moved to new AIA products.
* Ok, if the product and premium are largely similar, many will be.
* This is horrible for those policies that are joint life assured and have level to age 65 or 80 premiums!
With those policies with level premiums, these are actively being broken and moved.
This is forcing a repricing of policies that were guaranteed premium rates.
It doesn't sound very fair to me; it really questions the understanding of unfair contract terms when you strip away that AIA is increasing premiums substantially to the detriment of the client for what is an administrative function most of us deal with regularly.
Where does this fit in the unreasonable contract terms thinking?
Ok, that's just pricing, right?
They get fresh contracts and updated wording at a higher premium, but it's all good, right?
No way!
The extension of this change applies to policies before 2001 that don't receive passbacks and have always needed to be underwritten to be brought up to present-day policy definitions.
Yes, you're getting the idea.
If the policy is before 2001 and you're splitting the policy, AIA is insisting that ALL lives assured must go through underwriting and be upgraded to new cover. Not one or the other, all of them!
Hang on, wait a minute! After having the policy issued for over 20 years, the client is forced to be re-underwritten for an administration requirement?
Where does the basic premise of once cover is issued, the provider can't review the policy terms to be worse than they started with?
This is a real-world example. She has heart issues, and he has had cancer. They are not healthy specimens of humans for the underwriting process!
Now, the really interesting bit.
AIA allowed the clients to restructure the policy in situ, move the accelerated trauma to standalone and drop one of their life covers. It's not ideal, but relationship splits force all sorts of decisions.
Hang on, so the policy's fundamental benefits can be restructured without triggering upgrades and underwriting, but splitting the policy (an admin process) does?
Someone somewhere there seriously doesn't understand policy administration!
The moral and ethical issues coming out of providers at the moment are astounding, and over the years, none have been squeaky clean. Most do try their best, and that's good aspirational stuff.
This area with AIA really astounds me on the decision-making to force underwriting on people when they are going through what is already one of the more significant stressors of life.
Not to mention how inappropriate this is.
This whole mess is justified based on unreasonable contract terms.
I have to ask, are the existing terms of the policy as it stands undisturbed a problem? Nope, it doesn't appear to be.
If they are when the policy is split, there is a failure of logic somewhere!
Secondly, upgrading and applying new underwriting on an existing assessed and paid-for risk is to be done because of unreasonable contract terms.
What about the unreasonableness of the resulting underwriting and contract terms with premium loadings, exclusions, and breaking of level premiums as unreasonable contract terms?
I'm here to advise clients on the best way to manage the financial risks they face.
It is damn hard to follow through on that when the insurer can just decide they want to apply onerous requirements on existing policies with their admin processes.
I can understand the change of risk driven by the client (increased benefits, etc.); that's BAU; this issue is about administration.
Like the Southern Cross issues highlighted recently, this becomes a massive trust issue for AIA.
If you can't trust your insurer to treat you fairly, what is the value of your policy and the premiums you pay?
While I continue to find these issues lurking in the shadows, I'll continue to light bonfires around them, that I promise!
Again, insurers do better!
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However, their approach with the legacy policies is to force the "upgrade" on only one of the people being split off. On the basis that there is a new policy being created for one of them, and this is the trigger for the underwriting being applied.
For AIA, that too will be part of the justification; at the same time, it falls apart when you can restructure benefits in situ, but a policy split is underwriting?
Not ideal with Fidelity Life on this, at the same time, you can make the call on the one going through underwriting, so at least you can manage minimising the impact on the client to some degree.
For both, neither approach is fair to the clients concerned, as they are long-standing bought and paid-for policies, and the insurer should not be tinkering with them in the way they are.
Many of us don't have a lot of old policies in our client bases that get impacted like this, as changes over time typically mean that splits for good underwriting reasons have already been done or the policies were individual life policies in the first place.
Because of an unfortunate set of personal circumstances not related to the risk covered by he policy, clients should not be impacted like this. (Well, excluding special events increases that may, but probably are not, available)