While there has been plenty of debate around risk insurance advice, Col Fullagar argues that a more important debate needs to be had about how the major insurers deliver on the product.
Of late there has been much focus on the practices, both Pty Ltd and practical, of financial advisers particularly in the area of risk insurance advice.
Allegations of poor advice, inappropriate commission and twisting of in force business have been tossed about. The accountability spotlight has been fiercely focused with justification in part being "to maintain/enhance the professional standing of the financial services industry".
It cannot be forgotten, however, that the industry's professional standing whilst heavily reliant on the actions of advisers can be affected by the conduct of another participant; the insurer.
In a previous Money Management article (Trust me, I'm an Insurance Company, 21 March 2013) the matter of insurers exhorting advisers and insured's to display trust in them was considered. The point was made, however, that this is inappropriate especially when the trust requested is not backed up with anything concrete.
It is also counter-productive because the popular perception is that insurers care more about the shareholder than the policy holder so a request for trust can simply lead to distrust.
If insurers are serious about changing the perception, perhaps the time is right to focus attention on their practices as well as those of advisers because it is clearly the case that even if brilliant advice is implemented without any actual or perceived commission bias and the insurance remains in place, the public's perception of the financial services industry can still be decimated if the insurer acts in a way that is untoward and/or unprofessional.
One way to change or even reinforce the perception is to replace "insurer claims" with "insurer commitments".
Insurer claims are many and varied, for example:
"...all matters are handled expertly, sensitively and as quickly as possible"; and
"You can be sure that we will do everything...to make it as easy as possible for you."
A problem with the above is they suffer terminally from being mothering statements that are easy to say, difficult to deliver, and too often, not the reality. They are not believed, not trusted and may as well not be said.
If insurer claims are to be replaced with commitments, in the first instance there is a need to be more specific, to identify areas of import for the insured's and set out the standard that will apply.
What follows are some suggestions.
These have been drafted in the third person in readiness for the phrase "the insurer" to be replaced with a specific company name for as many of the commitments as that company may wish to make and believe they can deliver.
The insurer will, by its business practices and the actions of its management and staff, have and retain a reputation for integrity, probity and fair dealing within the financial services industry and the general community.
The insurer will be seen as ethical and will treat customers with respect.
Sounds like a given but if by its conduct an insurer fell fowl of the above in the public arena, the ability to link its name to this commitment would end with a re-engagement only being possible when issues were addressed and opinion turned.
(ii) Clear contractual intentions
The insurer will make available documents:
- that are presented in a way that encourages perusal;
- that states the position of all parties clearly and unambiguously;
- that are easy to understand; and
in which qualifications and exclusions are prominently shown.
Disputes tend to arise less frequently from documents that, because they are user-friendly, are read, and, because the position of all parties is stated clearly, are understood.
One might be forgiven for thinking that some insurer documentation would struggle to get over this bar and yet how crucial is it that insured's are encouraged to read that with which they are provided and, having read, they have a reasonable chance of gaining an understanding.
(iii) Service standards
The insurer will publish and adhere to best practice service standards in the primary areas of its dealings with customers including new business, general administration and claims.
The insurer will respond to reasonable questions asked by customers in an equivalent way to (ii) above.
A private survey of advisers revealed that, if given the choice of insurer time, money and system resources being spent on administration fixes or product tweaks, the preference was for the former by a slim margin of 100 per cent to nil.
Would service standards improve if they were openly and conspicuously published? Warranting of consideration perhaps.
And is it too much for an insured who has handed over hard-earned dollars to cover premium payments to expect that, if they have a question of the insurer, they will receive an answer? Difficult as it may be to believe, the reality for some/way too many, is that the answer appears to be "yes".
(iv) Information access
The insurer will provide access to information obtained during the underwriting and/or claims assessment process as and when it is obtained, subject to it being requested and provision of the necessary authority.
The insurer's actions in regards to information access will epitomise open communication.
The insurer will, when communicating an underwriting or claim assessment decision other than an acceptance of the application or claim, provide the reasons for the decision in an equivalent way to (ii) above, to include the provision of any specific underwriting guidelines relied upon.
The insurer will have due consideration to relevant regulation and legislation including the Privacy Act and Section 75 of the Insurance Contracts Act (1984) as amended; however, any reliance on available exemptions to the provision of information will be communicated in an equivalent way to (ii) above.
This criteria will not apply in regards to surveillance information if the insurer has reasonable grounds to assume the customer has not complied with their Duty of Disclosure or their Duty to Act in Good Faith towards the insurer.
Information is oft aligned with power.
An insurer's duty to act in good faith dictates that power be shared and thus information should be shared.
An insurer wanting to operate under a "guilty until proven innocent" regime and wanting to retain aits secret squirrel forensic advantage would be unable to make the above commitment.
Further when looking to avoid a policy by way of an accusation of non-disclosure, it is only fair, reasonable, open and transparent to provide a copy of the specific section of the underwriting guideline that is being relied upon, even if not requested.
Some will cry "privilege" and "intellectual property" but the nature of the intellectual property has already been revealed by stating how the particular circumstance is treated.
Finally, in order to avoid sharing information, the insurer equivalent of the boy who cried "wolf" can be the cry of "exemption" under the Privacy Act; with an apparent favourite being "it will reveal evaluative information in connection with a commercially sensitive decision-making process" which can at times be a longer bow than that used by Robin Hood.
(v) Benefit commutation
The insurer will, if offering or being requested to offer a commuted income protection insurance benefit payment, provide details of the calculation criteria such that an informed decision to accept or reject the offer can be made.
Whilst benefit commutations may not be the norm, they do occur both at the behest of the insurer and the insured.
If an offer is made, the advisers need to ensure the insured is in a position to make an informed decision which is hardly possible when the assumptions behind an offer are not made know.
In the absence of relevant information such as:
- assumed earning and discount rates; and
- mortality discounts
Caveat emptor would seem to be the dominant player.
(vi) Transfer terms
The insurer will, when withdrawing a previous insurance product and replacing it with a new insurance product of the same type, offer to existing customers of the previous product non-underwritten transfer terms to the new product on the same underwritten basis as that which applied to the customer.
The above will be subject to the customer being willing to pay the premium for the new product and/or exclusions applying in regards to any material additional benefits included in the new product.
Notwithstanding adviser groans when an insurer excitedly launches a brand-spanking new product, it appears to be the antithesis of loyalty rewards to lock existing clients into a closed, legacy product where eventually the dwindling portfolio and the not-so-dwindling claims experience can result in unaffordable premium increases.
The skeptic who ascribes deliberate intent to the insurer on the basis that they are seeking to overcome legacy book complications can best be countered when loyal insured's are treated in the same way as those who joined more recently.
The excuse "there is a different reinsurer for the new product" should be covered off at the time negotiations with the different insurer are being undertaken.
(vii) Resolution process
The insurer will, in any area of disagreement with a customer, proactively engage in discussions with the customer until it is agreed by both parties that no further progress can be made despite the best endeavours of both parties. Discussions may involve face to face meetings at the request of the customer.
The insurer will, if responding to a matter referred to FOS, use and not add to the response provided to the customer when the matter was referred to the insurer's internal dispute resolution process except in regards to any additional matters raised by the complainant but only in relation to such additional matters.
The insurer will retain and publish statistics of matters that are referred to internal and external dispute resolution and the proportion of each that are decided in the customer's favour.
There can sometimes be an over-enthusiastic, unilateral desire on the part of an insurer to call a discussion a dispute and, in so doing, magically turn best practice service standards into a 45 or even 90 day turnaround.
When the parties do not agree, the insurer v insured discussion process may take time and effort but the merits of perseverance are apparent to many who subsequently engage in an external or legal dispute resolution process.
If a matter is an agreed dispute and reference to the insurer's internal, and it is hoped, independent dispute body is made, the matter should be given due attention such that the insurer can reasonably say "this is our full and final position."
If this occurs, the insured should be confident that, unless additional matters are raised by them, a referral to the Financial Ombudsman Service, for example, will not inexplicably give rise to additional arguments from the insurer — a sign of more magic.
Not a perfect measure but arguably better than no measure of the independence of an internal dispute body is the fact that a proportion of disputes are found in favour of the insured. Certainly a result of 100 per cent insurer, nil insured might give rise for concern.
(viii) Correction of errors
The insurer will, if errors are found that materially and adversely affect claim payments previously made and/or administrative charges previous applied, implement remedial actions to ensure previous payees are not financially disadvantaged.
Mistakes happen and sometimes these mistakes may affect insured's other than the one currently involved.
All insured's, irrespective of whether they are past or present, should be confident that they will be treated fairly in the matter of the correction of errors.
(ix) Cost reimbursement
The insurer will reimburse customers for reasonable costs incurred in resolving a dispute if:
- the insurer agrees it was solely responsible for the error; and
- the insurer agrees to costs prior to them being incurred.
The suggestion seems fair and reasonable and surely, if a commitment to the above would so materially impact the insurer's bottom line as to cause concern, it would also seem fair and reasonable to suggest the insurer has a bigger problem than cost reimbursement.
(x) Claim requirements
The insurer will provide to customers, when requesting claim requirements, reasons for and relevance of those requirements in an equivalent way to (ii) above.
The insurer will, when obtaining claim information from a third party:
- ensure that any authority used will have been signed by the customer within 12 months of the information being requested; and
- provide advice to the customer of the party being approached and the information being requested, as and when the information is requested.
The insurer will, in respect of independent medical examinations (IME's) and factual interviews:
- arrange an appointment subsequent to and in line with dates and times suggested by or agreed to by the customer;
- proactively encourage the customer to attend the IME or factual interview with a support person of the customer's choosing;
- in advance of the appointment, provide the customer with a copy of the curriculum vitae of the person conducting the IME or factual interview
- provide the customer with a formal opportunity to give feedback on the IME or factual interview and the examiner or interviewer; and
- provide the customer with a copy of the IME or interview report and briefing letter as and when the IME or interview report is obtained by the insurer.
In respect of an IME:
- where possible, the customer will be provided with a choice of examiners; and
- the insurer will provide statistics of how many times each examiner has been used by the insurer in the previous 12 months and whether the examiner supported or not the examinee's claim.
In respect of a factual interview, reasonable details of the areas to be covered in the interview will be provided to the customer reasonably in advance of the interview.
A preferred insurer will, in respect of the use of surveillance publish its standards for selection of investigation organisations.
At no other time is an insured in a more vulnerable position than when they or a loved one is on claim.
Who could argue that special care and consideration is needed?
The assessor v claimant relationship should be based on equality and respect, not on despotism. The ability to achieve equality and respect will show to great effect the value of a skilled and empathic assessor.
These qualities are assisted by the sharing of knowledge including an explanation of why requested information is necessary to further the claim assessment. If a particular requirement is needed to implement prudent checks, why should this be seen as something so shameful that it cannot be made known?
Best practice dictates that pre-decimal authorities should not be used; after 12 months, respect dictates the need for a fresh authority.
Respect also dictates that the insured and/or the adviser should be kept informed on a regular basis about what is happening.
Sensitivity dictates that the insurer recognizes the impact some of its requirements can have on insureds which should in turn lead to mitigation of these.
For the insurer, the delicious irony is that the quickest and most effective way to be trusted is to put in place protocols such that trust is rendered redundant.
For an adviser and/or licensee that believes the ability to assess and rate the insurer experience is a valid recommendation criteria, an insurer's willingness to commit to some or all of the above and subsequently deliver may be a value-add way to differentiate insurers on an approved product list (APL).
It may even be that insurers unwilling to commit and/or deliver are restricted from the APL.
For an insured, knowing that commitments such as those above are in place may well replace doubt with confidence.
Any discussion concerning insurer commitments such as those above may draw a polarized response:
- they already happen and thus there is no need to require further commitment to them; or
- they are impractical and flawed and would never work.
But who could reasonably argue that the above commitments represent what an insurer would do if they were to act ethically and treat insured's with respect.
For all parties, the equation is straightforward; replace claims with commitments, meet those commitments and claim credibility.
Col Fullagar is the principal at Integrity Resolutions Pty Ltd