Underwriting at time of claim a 'serious problem'

A member of the Senate Economics Committee has described direct insurance and underwriting at the time of claim as a serious problem for the life/risk industry that needs to be addressed.

NSW National Party Senator, John Williams expressed his concern during the appearance of the Financial Services Council (FSC) before the committee, echoing recent concerns expressed by both the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA).

After receiving an explanation of the workings of the underwriting practice, Williams said he believed it was a serious problem “when people think they have insurance and it may well not be the situation when tragedy strikes”.

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“I think that is a really serious problem, when families take out their direct insurance thinking that the family is covered,” he said.

“For example, a bloke takes out insurance, he dies of a heart attack, they check out his history and they find that at two weeks of age the baby has had a valve replaced in the heart so they are not paying. That is where I see a series problem in the industry, which I think this committee must address.”

Earlier, FSC policy manager, Bianca Richardson had told the committee that while some direct insurance providers underwrote at the time of application, this was not always the case.

Both the FPA and the AFA have called for action to address the problems of insurance being underwritten at the time of claim.

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Once again the conflicted FSC comes out swinging to protect its members, in direct competition of the so called clients best interest. Is it in the clients best interest to offer insurance that will never pay out? Who cares they are dead anyway right? This must be the thinking behind the FSC to stand there and defend these policies, lets be candid these are policies that clients would be better off without, they would be better off putting the money away rather than paying the premiums. FSC = Greedy conflicted buggers.

It is completely unacceptable that an insurer takes premia over many years in some cases from a client who in good faith thinks he/she is covered only to be not covered when it is too late. This is a particular problem for automatically acceptance in super, as the AA provisions are often used as a selling point. This must be addressed by regulators

You bet this is flawed or as I like to put it deliberately engineered by the insurance companies to increase the funds under management so they can extract extra revenue at no or very little cost to themselves. This situation is fraudulent and I hope a major law firm is working on a class action against these thieves. AND FSC has the temerity to label advisers "Crooks"!

ONYA Wakker. About time someone addressed this short coming and what is basically theft / product sold under false pretenses.
Next step is to address all the other flaws and maybe clients will eventually achieve true piece of mind and thats what insurance is all about.

I think there is a place for group policies that are not individually underwritten. But just make sure the personal policies are not underwritten at claim time.

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