How much knowledge of medical conditions are life advisers expected to have?
[Opinion] Steve Wright asks how much do life and health advisers need to know about medical conditions in order to provide suitable advice?
Wednesday, October 30th 2024, 4:38AM 
2 Comments
by Steve Wright
Giving suitable advice on life and health insurance is a complex matter. If it wasn’t, clients would have little need for the services of an adviser.
We know life and health insurance must be ‘sold’ and that advisers are crucial to getting clients to ‘buy’ insurance, that’s not in question for me.
However, we have a new regulatory regime now, and advisers are expected to give advice with the due care, diligence and skill, of a prudent person engaged in giving financial advice (Section 431L of the FMC Act).
The questions for me are:
- How much more than a simple recommendation to ‘buy’ insurance do advisers need to give?
- What justification for a product and provider recommendation is sufficient?
I guess the answer depends on the nature and scope of advice agreed with, and understood by, the client, but this does not appear to give advisers an opening to effectively ‘avoid’ giving advice.
An inappropriately limited nature and scope of advice does not advance clients’ interest, can lead to poor client outcomes and is likely to be frowned upon.
Not all life and health insurance policies are the same.There are sometimes very significant differences between products, their terms and conditions, benefits and exclusions.
This means likely diverse claim outcomes, even where the exact same condition is suffered.
Understanding the potential differences in claim outcome between competing products would presumably be expected of a ‘prudent’ adviser, so adequate understanding of certain medical conditions, their consequences and likely treatment impacts, seems necessary to some extent.
A good example might be the various trauma products and their definitions of covered conditions, in particular cancer.
If you don’t know at least some basics about different types of cancer and their levels of advancement (their staging) and their likely impact on the client, how can you understand (and help the client understand):
- the sums insured needed; or
- the differences in competing trauma products’ cancer definitions; and
- when and how much, competing products might pay, in particular circumstances?
Careful product and provider selection matters. Taking steps to ensure your client understands your advice is now a requirement.
A client arguably gets the greatest benefit from a skilled adviser who:
- knows enough to be able to explain the possible consequences of serious illness or disability (in terms clients can easily digest); and
- can accurately compare different products for their suitability; and
- can explain the consequences of different product choices for the client.
This last point is necessary to ensure the client understands the possible consequences inherent in product and provider selection, in particular the potential dangers of choosing products or providers because of current price, or ‘sign-up’ deals, being offered.
Skilled advisers are more likely to be respected, trusted and recommended by their clients, so there are also good business reasons to learn more and improve advice skills.
Steve Wright has qualifications in economics, law, tax, and financial planning. He has spent the last 20 years in sales, product, and professional development roles with insurers. He is now independent and helping advisers mitigate advice risk through training and advice coaching.
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Comments from our readers
The challenge is I don’t recall any training at any time for advisers on anything medical.
I haven’t been through new adviser training from providers recently to know for sure, but my conversations with new advisers suggest they have extremely limited medical knowledge or ability to have a meaningful discussion about medical conditions.
I have long said that you need three qualifications to do what we do, and anyone in one of these professions will likely pay more for less work and stress than what we do. Being a medical degree, a finance/accounting degree, and a law degree.
This is an area where there is a massive knowledge gap with advisers, and most aren’t aware of or intend to solve formally.
If you survive long enough, you learn enough to get by, which is how it has been done, and for the future, it is how it is being managed.
Replacement advice issues are largely about the medical piece, the client under disclosing with what they think they need to provide, forgetting a bunch of things, and the adviser not appreciating this reality for clients and the resulting issues that result.
A convo this week with a colleague highlighted even when you get disclosure the disclosure may not be complete, and that can become a significant issue.
What's the answer?
I don't know, but clinician training isn't something I'm expecting to see as a result by being impractical and expensive for the typical adviser.
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