When an insurance policy is based on outdated medical advice and doesn’t pay out - like the recently reported heart attack example in the Fairfax expose of CommInsure, who is responsible. The adviser, the insurance provider or ASIC for allowing it to be sold in the first place?
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If we are talking about an advised product, I believe that all parties need to bear some responsibility for their behaviour. If there is an advisor who recommended the policy, our view is that the advisor has a responsibility to ensure that they have established the appropriate level of cover for the client, structured the policy appropriately and aligned it with their specific needs. In the same vein the product manufacturer has a responsibly to ensure they review claims fairly to meet the original purpose of the insurance.
In my view claims should not be based purely on the definitions set out in a lengthy legal document, but with the flexibility to provide support and financial assistance in a client’s time of need, and should always incorporate the continued medical advancements being made. ASIC as the regulator needs to ensure some level of minimum standard is maintained for the consumer to be protected from ambiguous, outdated or poorly worded definitions.
Additionally ASIC has a shared responsibility with the insurance companies as minimal uniformity in insurance naming protocols exist. Comparative policies of the same description are often advertised and sold without advice and based on cost alone. Many policies appear to be leveraging their affordability without highlighting that the cost saving is achieved through definitions which are significantly more difficult to claim on.
The situation with CommInsure also provides a timely reminder as to one of the benefits of working with an advisor. As advisors, we regularly consult with the insurance providers to obtain a deeper understanding of how they are advancing definitions and their decision process when upgrading policies. At every client review we consider the appropriateness of the insurer, their definitions and how the insurer’s claims management process is administered and resourced.
Advisors facilitate many claims on behalf of clients and as an insurance policy is a legal contract, there are certain terms and conditions that need to be met in order to ensure that the process is handled professionally.
I strongly believe that the role of the advisor is to facilitate this process and deal with all parties concerned to ensure a prompt and favourable outcome. For these reasons the best advisors generally only deal with a small but select group of insurers who have a long standing presence in the marketplace. By establishing these relationships it enables the advice practices to deal directly with senior decision makers, which means they are well positioned to handle claims on their client’s behalf. In essence this enhances the probability of a favourable and prompt outcome.
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