AFA demands APRA collect data on what lawyers are extracting from group life

29 April 2020

The Association of Financial Advisers (AFA) has called on the Australian Prudential Regulation Authority (APRA) to begin collecting data on fees paid to lawyers on group life insurance claims.

The AFA has made the call in the face of heavy criticisms directed at life/risk advisers by plaintiff law firm, Maurice Blackburn which claimed group life insurance within superannuation represented better value than advised life insurance and that life/risk advisers therefore needed to justify their value.

Responding to the attack, the AFA has issued a bulletin to members in which it states that a comparison of the average claims benefit actually paid shows that people who receive advised are 306% better off when claiming death benefits than those utilising group life and 391% better off when it comes to total and permanent disability (TPD) claims.

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“The average claim benefits demonstrate very clearly that those clients who receive specific tailored life insurance advice from a financial adviser receive a benefit far more relevant to their circumstances and their household debt and living costs. This clearly demonstrates significantly more value for financial advice clients,” it said.

The AFA then went on to point to what lawyers were charging superannuation fund members to dispute group insurance claims, stating: “From what we understand, these lawyers often charge at least 30% of the claims benefit”.

“There are no statistics on how much of life insurance benefits end up being paid to lawyers, however the inclusion of this information in the data collected would be very important when measuring value.  We call for the collection of data on fees paid to lawyers on life insurance claims,” it said.

“In terms of the full cost to the client, this would need to take into account any costs incurred by the super fund that are otherwise paid for by the member out of their super fund fees, and not just through life insurance premiums.  This might include insurance administration, call centres, general advice and even intra-fund advice related to insurance,” the AFA said.   

 




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Lawyers are not acting in the best interests of clients.
They would never suggest the client submit the claim themselves rather than via them.
Their fees and charges are not transparent.
They do not represent value.

In NSW, lawyers only need a measly bachelor's degree AND only do 10 hours of CPD per annum. they should be required to do at least 100 with 99 in ethics and the rest in the law as the least ethical persons in a society which is consistently ranked below that of a used car salesperson (to be honest used car salespeople are unfairly compared to lawyers, the cars they sell are pretty good and have extended warranties and good value for money)

along with accountants, which btw is not even a protected term and which only requires a diploma to qualify, are the worst of any "profession" (I actually do not regard either of these two occupation groups as a profession, only a trade)

in contrast, I, as a financial planner (a restricted term which can only be used by licensed and appropriately qualified persons such as me), have a master's degree (AQF 9), sit a national exam, and am legally required to act in my clients best interest. I am a professional these scum bags are gun-toting cowboys from the wild west.

Excellent idea. Just what do these Lawyers charge people?

In 2014 I stood beside the hospital bed I a person I had known all my life. He had been diagnosed with a significant brain injury. He wasn’t a client then so I didn’t say come and see me I can help you with claiming your insurances because our books were closed.
Unfortunately, he went to a solicitor to for assistance with the claim even though in his instance there was no argument as to whether he would be paid or not he just needed assistance to fill out the paperwork.
Not offering out assistance became one of my biggest regrets when he walked into my office about 6 months later because one insurer had dragged the chain with a letter from his solicitor which was a request for a further $5,000 to write a letter to hurry them up.
Even though they were all group insurance policies and we had not received commissions we assisted them with the unhurrying up of the third claim for free.
The Industry Super fund member received a total of about $260,000 of which he lost about $24,000 to the solicitors to fill out the paperwork for 3 separate funds and including approximately $6,000 to cover photocopying, phone calls, postage and other sundries netting him approximately $236,000.
We then charged him $2,200 to advise on how best to utilise his claim proceeds, but if he had come to us in the first place, we would have charged $3,300 maybe $4,400 and assisted him with the claim as well. That is a difference of approximately $24,000 which would have gone to the brain injured persona and his family.
I could understand the solicitors charging a fee of about $24,000 if there were issues with the claims, but there was not. Due to a brain injury he just needed assistance with helping fill out the paperwork. Why did he go to a solicitor rather than an insurance adviser or a financial planner? The adds on tv run by solicitors telling him that they will help him.
Why are insurance advisers and financial planners not running the same adds? We are too busy seeing a client, analysing what they have and what the shortfall in needs is, preparing workpapers and numerous quotes to cover all sorts of comparison requirements, writing a Statement of Advice to explain that we are going to receive some income if they accept our recommendation to be covered and if they can’t afford adequate cover, what trade offs and considerations we have made.
Don’t get me wrong I have been writing Statements of Advice for over 20 years and have no problems putting in writing what we have recommended and why and what we will get paid if they accept our recommendations and we can find an insurer who will cover them.
It has just got out of hand in recent years, there is so much more needed than this to cover a whole heap of compliance requirements that add no value to the client or to a quality advisers process.
No system is perfect but continuing to make it more difficult for quality advisers that have passed all sorts of compliance tests is not the answer.
Toughen up on group insurance, toughen up on the unethical adviser, toughen up on solicitors who now see claims as their easy picking grounds and free up the time for quality advisers to do what they have always done ie to look after the financial needs of Australians.
When I expressed my views on this recently one responded said. Great comment Lee. “Perhaps the government could restrict solicitor activities in insurance claims to those actually only requiring court representation, not admin/advocacy OR they too should get an AFSL to deal with a product” and I would like to add to be held accountable to the Best Interest Duty.

Imagine the outrage if a financial planner who is far more qualified than a scum lawyer tried to charge $20k for the service which I know for a fact would do a better job than some scum lawyer with a measly bachelor's degree.

we wouldn't because it's immoral.

I think it's the legal profession, not financial planners who need higher standards and codes of conduct.

unfortunately for the rest of society, these locusts have infested all positions of authority and make rules for the rest of us while excepting themselves.

Great idea from the AFA. I would suggest we go further with data on settlements e.g where the insurer has agreed a reduced claim to avoid legal costs and where the client would have been better off without the lawyer. Lets name and shame these cockroaches.
The next step would be protection laws ensuring lawyers can only be involved if the insurer has already declined the claim. Lets put the grubs out of business too.

30% (plus the cost of correspondence between fund/ insurer and the acting law firm) for doing nothing more than sending in forms with a cover letter demanding settlement of the claim otherwise Court proceedings will be issued.

Ambulance chasers the lot of them.

lawyers are the true scum of the world

Let's put a call out to clients of lawyers who received an insurance benefit to see how much they got paid and what % the lawyers took and let's compare that to financial planners.

i am willing to donate $10,000 dollars to the AFA to conduct this research and publish it.

if the AFA is interested or anyone else is interested please put a note here and your details and i will contact you.

i am sure other advisers would be willing to put money into it. a few ads in the papers and radio is all we need i think thousands will come out to tell us how much they got ripped off.

Its refreshing to see the AFA stand up for Advisers and take have a crack back at some of the barnacles of the Advice industry. Lawyers should not be involved in any claim until its has been initially assessed by the insurer and then been through the process with AFCA. Lawyers behaviour has been opportunistic, misleading and frankly not in the best interests of the consumer, and its time to clean this up!

would the lawyer say …. if you go on your own you will get $100,000 … if I help you the outcome will be $200kless my cut of 60k less expenses of $15k … giving you $125k?

Maybe an RC into Lawyer misconduct, chaired buy a Financial Planner?

Exhibit 1 - investors in great southern projects who were told by class action lawyers not to pay their loans, which saw them double in value due to exorbitant interest rates and penalties over several years. And what did the lawyers eventually negotiate on behalf of their clients? Bendigo Bank paid their legal fees and not a single cent was paid to the investors. And do you think these leeches returned the phone calls from aggrieved investors or helped them to negotiate a payment plan with Bendigo Bank to avoid losing their homes? I think you can guess the answer to that.

Client of mine had a Lawyer quote $12,000 to claim $90k of TPD after she was referred to him via a friend. He "specialises" in TPD claims and when she said she had a financial planner, he googled me and then put the fear of god into her that I wouldn't look after her and if she had signed anything from me she would lose control of everything. She called me to let me know as she has been with me for years and she didn't think it sounded right. After discussing it and explaining that the Lawyer was in fact full of shit, I helped her successfully apply for her TPD claim as a pro-bono case (which she has always been as she is on the disability pension and very ill). Can't wait until we all get to the same "professionalism" level that Lawyers are at!

I had a friend who was diagnosed with MS. She was having problems with her TPD claim via her super and I looked into it for her. The MS society had referred her to a lawyer for assistance but it was unclear what they did for her. She completed the claim form and they submitted it for her. Their fee was $17,000. I asked for copies of paperwork submitted but there didn’t seem to be anything. The employee super had been transferred to become a personal super after the member exited and this had caused the delay/problem (slight changes to the contract and a new member number) so I was able to resolve her issues quickly, apart from that it was a straight forward claim. This area does need investigating.

DID the lawyer still get the fee? Great advice from MS Society too... maybe the lawyer sends them a spotters fee (fully disclosed of course)?

Spotters fees, so old school. No just tickets to sporting events and corporate boxes, lunches, expensive christmas hampers etc. these days. All very above board.

Yes they did. The sad thing is a lot of people with serious health condition are too exhausted to take up the fight even though I offered to help her (pro bono of course). I did raise an eyebrow at the MS Society referring her too.. A Commission wouldn't run out of questions around this area that's for sure.

I had a friend who was diagnosed with MS. She was having problems with her TPD claim via her super and I looked into it for her. The MS society had referred her to a lawyer for assistance but it was unclear what they did for her. She completed the claim form and they submitted it for her. Their fee was $17,000. I asked for copies of paperwork submitted but there didn’t seem to be anything. The employee super had been transferred to become a personal super after the member exited and this had caused the delay (slight changes to the contract and a new member number) so I was able to resolve her issues quickly apart from that it was a straight forward claim. This area does need investigating.

I think we need to call an RC into lawyers and their scams and masquerading as a "profession" when they are not.

Phil Anderson for PM

Under FASEA and my licensee standard, I can't even help a client fill out a credit application or I am seen as giving credit advice, which is not what I do. So why aren't lawyers required to hold AFSL's if they are assisting in Insurance claims that relate to financial products?

So as long as a Financial adviser has a professional designation and are acting in a professional capacity under instruction from a client, a relative of the client or a person appointed by the client, they too should also be subject to the same exemption ????

(d) is quite interesting. I'm not sure taking such a huge % of a claim would constitute "professional charges" or "reimbursement of expenses"?

Seems to be no restrictions whatsoever in relation to the volume of the client's funds that can be accessed by the Lawyer for the purpose of their payment.It seems they could potentially take 50%, 60% or 80% if the dispute went on for a long period of time or if the Lawyer's hourly rate was overly excessive.
It also appears the charge rate is not commensurate with potentially the uncomplicated nature of application and management of a claim if a dispute does not arise or it does not get to court.
It appears Lawyers are charging excessive costs to complete and submit documentation.

Under the FASEA Code of Ethics Standard 7, Financial Advisers are bound by the following:
" You must satisfy yourself that any fees and charges that the client must pay to you or your principle any benefits that you or your principle receive in connection with acting for the client are FAIR and REASONABLE and REPRESENT VALUE FOR MONEY FOR THE CLIENT "
If a Financial Adviser were to charge a fee of 15%, 20% or 30% of the claim proceeds of a $300,000 TPD benefit, they would be in breach of the code and if that client were to lodge a complaint, the justification for that level of fee would be impossible.
I believe it is now high time Financial Advisers and the AFA & FPA openly and strongly promoted the specialised claims related services they can provide to the wider community .
Many claimants who are in significantly compromised positions regarding their physical or mental health are vulnerable to the offer of assistance from a Lawyer because they may possibly believe there will be a momentous battle to fight to obtain their insurance benefit.
Often, they may be told verbally by the Lawyer that insurance companies will be difficult to deal with and will require considerable pressure applied to determine an outcome.
At a time when a vulnerable person does not wish to be fighting for something on their own, they agree to the outrageous fees charged by a Lawyer who is only taking on a case they know they have a 90% chance of securing a benefit for the client anyway.
Experienced financial Advisers who have a long history with current and historical insurance products , definitions and policy structures and claims assessment processes are very well placed to assist many individual and group insurance clients secure their insurance benefits in regard to a genuine claim.
The investigation into the exorbitant fee structures and costs that Lawyers are charging vulnerable people should be immediate.
Why are Lawyers able to charge an open book of fees with no justification of fair, value or reasonableness when Financial Advisers are under severe scrutiny and are constantly being controlled by legislation and regulation as to what they can charge for effectively the same or better service if a case does not get to court.
I would suggest that experienced and knowledgeable Financial Advisers would stand every chance of effecting a positive or negotiated outcome for a genuine claimant before it ever gets to a legal challenge or court.
It is time that Financial Advisers advertised specialised claims management services and cut the lawyers lunch by offering quality advice and service at a reasonable cost.

It is impossible for any Lawyer to be providing legal advice to a client regarding an insurance claim benefit without having to refer to insurance policy conditions and terms, nominated beneficiaries, policy definitions etc.
All information transferred from the Lawyer to the client in relation to these matters would normally be considered personal financial advice and yet they appear to be able to get away with it. This is unacceptable.
As they are dealing with an individual client and dealing with their specific circumstances, it cannot be deemed general advice as they would be discussing with their client the communication between claims assessment, medical reports, trustee discretion and decisions etc.
How is a Lawyer that has completed an Arts/Law degree and had no formal qualifications in financial services or insurance advice able to charge exorbitant fees to a client for the insurance claim application and settlement process if the case never has to go to court and never has to be legally disputed ?

They drafted the laws, and our pollies signed the laws into reality!

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