In this age of automation, computerisation and improvisation, we in the Australian nation are truly blessed in so many ways, not the least of which is having access to speedy service online.
Industries aplenty are openly committing to service standards aimed at showing they can be rapidly receptive to their customers’ needs.
Taking up the challenge, the financial services industry, in Section 8.4 of the Life Insurance Code of Practice makes this commitment on behalf of participating insurers: “Prior to making a decision on your claim, we will keep you informed about the progress of your claim at least every 20 business days unless otherwise agreed with you … We will respond to your requests for information about your claim within ten business days.”
Or to put it more simply: “We will update you about your claim at least once a month and if you ask us a question, we will take up to two weeks to respond.”
Impressive stuff! (Insert sound of tongue being slotted firmly into cheek.)
One wonders whether a business development manager seeking to win an adviser’s business by bragging about the above service standard would deservedly leave empty-handed.
Indeed, a bar set any lower would find itself “en-trenched”, as the might French say!
Insurers could point to online applications, tele-underwriting and who knows what else to self-defend but surely, at best, this means that the focus is on speeding up the process of capturing business at the expense of the assessment and payment of claims.
Sadly, though, any defense would oft soon be shot to pieces when examples of the new business and claims process are considered, which will shortly occur.
Cause of delays
To find out the true cause of delays would require an insurer confessional, which is unlikely to occur, but indicatively a few things may contribute:
Lack of experienced staff
By way of example, a question recently asked of a senior claims assessor: “In regard to the three-tier definition of total disability, can you please confirm that the insured CAN choose, as distinct from the insurer WILL choose, which of the tiers will apply to the assessment of a claim”.
No response was received so a week later a follow up was sent, resulting in the following: “I have referred the query to product and will reach out to them today to get a timeframe.”
Dare it be said, more than a month later, an answer is still awaited.
The staff frisbee effect
The following email might well be set up as a standard template: “The previous assessor has left us to work with another insurer, so the file has been allocated to me. I will need to review everything, but I will get back to you in due course.”
Possibly due to flow on from (i), there appears to be an ever-increasing number of people skipping from one insurer to another, in search of improved conditions. Good on them if they succeed but is it not possible for insurer staffing levels to consider this contingency.
A sign of the times; at the bottom of emails will often appear a box, advising the recipient of which days the sender works.
Again, good on the incumbent for being able to swing a short working week, but for the insured this usually means turnaround times will be 20 or 40 per cent slower, depending on the number of days worked.
Another recent example:
Day one – Claim form and financial evidence lodged
Day 40 – Claimant rings insurer, saying: “I was told it would take a week for the assessor to look at my claim.” Response: “It hasn’t been assessed yet.”
Day 100 – Claimant rings insurer again and asks same question. Response: “Look she’s just got back from five weeks leave, I think mid-last week, so she’s probably trying to catch up on her outstanding work … She’s in a meeting at the moment … I’ll send her an email, so she can start the assessment.”
Day 110 – Claimant rings again. Response: “I am sorry, but she is not available.”
At times like this, there are no words …
Third party involvement
Third parties include reinsurers, medical consultants, investigators, etc.
“The file has been referred to other stakeholders” is secret code for: “Someone outside the company is looking at it.”
A reasonable question to ask in response is, “When would you expect to hear back?” An unreasonable response to receive is, “As soon as I hear back, I will let you know.”
The following is unbelievable but true …
Claimant’s representative emails claims assessor: “Could you please send Mr X the tape recording of his phone conversations with your company.”
Assessor: “The tapes are for training purposes only and cannot be provided.”
Representative: “Whilst the tapes may be used for training purposes, they in fact form part of the file and, under Privacy Laws, must be provided if requested.”
Assessor: “I would be happy to send the tapes as soon as you send me the appropriate subpoena.”
The above, and countless subsets of them, all contribute to the rich tapestry of delays that, not always but definitely too often, drive to distraction, client and adviser alike.
But setting aside such trivial matters as customer sanity and industry brand damage (tongue remains firmly within cheek), there is a more sinister impact of delays.
Real life new business case study
Mr K and his business partner submit applications for the Big Four risk insurances. The insurer takes 11 days to assess the applications and respond with further requirements including the need for medical reports and financial information.
Over the ensuing six weeks, the process of requesting and providing information continues with the process being epitomised by swift provision of information via the adviser and less-than-swift assessment of same by the insurer and its “other stakeholders”.
Eventually, the underwriter decides that amended terms can be offered on Mr K’s application – notwithstanding the other is held up while some other matters are resolved. The adviser approaches the insurer and requests the requisite form for Mr K, but the request is refused as the insurer expresses a preference for waiting until both applications are ready to proceed.
Six days later, the insurer’s preference point is reached and amended terms are sent to the adviser. These are signed and emailed back to the insurer within 48 hours. The policy is issued with a start date of six days after the forms were signed.
Arguably, throughout the above process, delays totaling in excess of 15 days could be identified.
The trauma policy included the standard 90-day exclusion for cancer and, no surprise to the reader, at Day 75, Mr K suffers a heart attack. A claim is lodged and, whilst conceding there was no question in regard to the duty of disclosure being met, the claim is duly denied by the insurer because the insured event occurred within the exclusion period.
When a challenge is raised on the basis of prejudicial delays during the application process, the insurer upholds its decision stating that: “We did not identify any unreasonable delays with the assessment.”
What the fiddley-dee?
If the purpose of the exclusion is to protect against anti-selection and there is agreement there was none, is it not bordering on hypocrisy if a claim is denied because there were “no unreasonable delays”; and is “unreasonable delay” a defined term within the policy such that it and reasonable delays are not confused?
No doubt the above decision would have been the same if, 12 months and 15 days after a term insurance policy started, suicide was because of something that occurred a short time before.
One solution might be for the insurer to take a less dogmatic approach to claims assessments in situations such as those above, recognising the essentially arbitrary nature of time-based exclusions.
A less subjective solution, certainly for the 90-day trauma exclusion, might be to amend the exclusion such that it starts from the date of application submission bearing in mind that the Duty of Disclosure provides the necessary insurer protection from this date until “the policy is entered into”.
If there were concerns that the new business process might take longer than the exclusion period, due to “reasonable” delays, a possible, albeit not perfect, solution might be to make the exclusion period the latter of:
- 90 days from the date of application submission; and
- the date the policy is entered into.
A simple change such as the above would reduce the pressure on the new business process and provide greater consistency, certainty and comfort in and with the assessments made.
Delays are, however, not only potentially prejudicial in a new business environment; they can impact on claims as well.
The most obvious is in regard to depriving the claimant of the use of the claimed funds.
Not a problem – that is why Section 57 of the Insurance Contracts Act was invented, so that interest would be payable if a delay occurred.
But what if the insurance had been set up for a business purpose such as keyperson or buy/sell? A delay in these areas might lead to the business suffering a capital, not just an interest, loss.
And what about the buy-back facility under trauma and TPD insurances? If the buy-back is predicated on surviving 12 months from the date of payment of the initial claim proceeds, the impact of a delay is patently clear.
Then what if the claim is under the terminal illness provisions of term insurance?
In another real-life situation, a lady who was terminally ill was deprived of the opportunity to take a last holiday with her family because of delays in the assessment of her claim. Thankfully, the position was not exacerbated in that the claim was finalised in time for her to personally meet with and divide the policy proceeds between her three children.
Tragically, the one thing that could never be the subject of compensation was the fact that, over those precious and irreplaceable months, instead of being able to spend calm, quality time with those she loved, her energies were focused on fighting the insurer for her just entitlements.
If delays, unreasonable or not, cannot be eradicated, and arguably they cannot, it should be contingent on the insurer to remove the prejudicial impact of those delays on the insured or, in the alternative, if exclusions are included in policies and it is the insurer’s intention to rely on them, they should be written in a logical way and applied in a reasonable way.
Adviser vigilance in these matters is, yet again, a value-add associated with their involvement in the risk insurance advice chain.
Too many matters are being made public of late, causing damage to the industry’s reputation. The skullduggery of delays should not be allowed to add to them.
Col Fullagar is the principal of Integrity Resolutions.