Clients still need help with basics: IFSO
Advisers still have an important role to play in filling in client understanding of some of the basics of insurance cover, the Insurance and Financial Services Ombudsman says.
Friday, April 5th 2019, 6:00AM 
5 Comments
Ombudsman Karen Stevens said a significant portion of complaints to the IFSO scheme involved the insured being turned down for not having proved a prima facie claim.
But many clients did not understand what that was - or why it should be up to them to prove a loss.
“Financial advisers have a really important role in educating their clients about the claim process and what clients must prove to get their claim paid,” she said.
“We hear from a lot of unhappy clients, who are surprised that it’s on them, not the insurer, to prove their loss and provide the evidence. It’s a good idea to set these expectations early, before clients need to make a claim.”
She said advisers could help by explaining the client's obligations to provide evidence for a claim.
In one case she dealt with recently, a man with income protection cover was injured when he fell running down steps.
In order to show a prima facie claim, the question was asked whether, solely due to injury or sickness, he was unable to perform his usual occupation for more than 10 hours a week or unable to perform one or more of the important income-producing duties of his usual occupation.
The case manager said there was no medical evidence of this and the insurer was right to turn him down on this basis.
In another case, a client was turned down because there was insufficient evidence to show he met the required policy definition when he was injured in a mountain bike accident.
The policy defined "major head trauma" as a trauma that caused at least 25 per cent impairment of whole person unction lasting more than three weeks. He was turned down because doctors believed he would improve.
“Financial advisers can really add real value for their clients,” Stevens said. “The best time to set expectations around insurance is before they need it. If you can help prepare your clients for the unexpected, they will be grateful to have insurance cover when the time comes.”
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Comments from our readers
I've found the most succinct advice at the start is, an insurance policy pays for what it says it pays for, not what you think it should pay for.
(1) did the insured actually have a current adviser; and
(2) if they did, was the adviser helping the insured make their claim?
Though Karen raises good points, that shouldn't need to be raised in an ideal world. But we are dealing with made ADD out there and it's showing badly at claim time.
A simple approach to this is to explain in the process who provides what sort of information through the process.
Income protection is a great spot to demonstrate this. Your disability is signed off by your doctor, you have to prove financial losses and the insurance company assesses both your application for cover and claim. If you have agreed value covers, we can reduce the load on you at claim time, as that bit has already been done. (full claim, as partial claims do trigger some need for financial information)
And Murray’s point, where is the adviser? If they even had one. If you don't do claims, you need to.
It's one of the most effective ways to understand the consequences of your advice and how your products actually work. Given the Aussie stats are likely not far off the same for us 90% of advisers aren't involved in claims.
No to mention the plain old service aspect clients expect from you ;)
There are always going to be people who want to pay a little as possible and assume they are covered for everything, that's the way they are, and for others, they are just too busy.
There has got to be a reasonable amount of responsibility on the client to understand what they are buying and not hand on all responsibility to the adviser.
I agree, the client still needs help with education on what they have purchased, and maybe this is where the insurers can help advisers by not only sending the policy wording in one document but drip feeding policy wording benefits to the client over time to help educate them.
I don't think there is a simple answer, but more paperwork is not going to solve the issue.
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Also explaining every policy definition for IP, Trauma and Disability products to every client before a claim..yeah nah.