When an insurance policy is based on outdated medical advice and doesn’t pay out - like the recently reported heart attack example in the Fairfax expose of CommInsure, who is responsible.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?
Top answer provided by:
Joel Edelman
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regulator needs to ensure some level of minimum standard is maintained for the consumer to be protected from ambiguous, outdated or poorly worded definitions.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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Comments7
"Thank you for the comments. After reading some of the comments I wanted to clarify a few points. - The shared responsibility to the client is that the advisor has assessed the insurance needs appropriately and secondly chosen an insurance product based on the insurance companies assurances to maintain their product as current and the definitions improving. The advisors responsibility cannot be to assess definitions as advisors do not have a medical training. - We choose to maintain contact with a smaller group of insurers to ensure we stay well informed on the insurers processes and procedures. This ensures the correct people are spoken to from application to claims. - Most claims that are held up or rejected prior to our involvement occur because information has not been provided to the correct people in a clear format. The claims highlighted recently with Comminsure did not have advisors, however that was not the question asked by 'Thomas from Newtown'. The issue was about the responsibility when definitions result in a claim being rejected due to them being outdated. We believe that the insurer is 100% responsible in this scenario. "
Joel Edelman 12:46 on 05 Apr 16
"Unfortunately everyone is treating consumers as dumb sheep that need a shepherd to protect and herd them. As a fully qualified Financial planner I can't be the "all seeing" shepherd. In fact I have many independent knowledgeable and smart clients who, I believe, are and can take responsibility for their own decisions in life. I apologise for the "boy" analogy, but I can not be responsible if a client bought an EH Holden in 1964 and does not want to trade up. Todays cars are safer, more fuel efficient and faster and I regularly offer my clients the chance to review their needs and trade up, if it is in their best interest to do so. The dangers of trading up a personal insurance package is the risk of loadings and exclusions being attached to the new policy. So sometimes there is a dilemma that the new policy may be cheaper with better features, benefits and definitions, but may come with loadings or exclusions. I assist my clients to make an informed decision that is in their best interest. If I recommended my clients buy that EH Holden in 1964, it was the best option for the client, at that time. I should not be held accountable if they had an accident and the outcome was horrific, because the car had no air bags or ABS or a favourable crash test rating. I believe that if these people who have had to put their cases to the media for attention had a Financial Planner to liaise with initially, then these outcomes could have been more favourable for these people, from the beginning."
Bill 12:33 on 29 Mar 16
"I agree with Marcus...for an Adviser to give advice on which definition is the best, one would need to be a surgeon/oncologist etc and obviously advisers are NOT that...some maybe but I suspect this would be rare. I blame ASIC or whichever watchdog is responsible. I find it unconscionable that life companies have been able to get away with what they have for so long now. If the watchdogs prohibited the life companies from closing product series, then the references in the comments above couldn't happen. If companies were forced to pass back upgrades of existing definitions, then there would be no need to replace products...not only would a client receive ALL upgrades BUT they wouldn't be placed in this dilemma which potentially puts a claim at risk by resetting the 3 - year Non-Disclosure period every time a client has to undergo a full personal statement. More needs to be explored in this area by ASIC and maybe the ACCC"
MatthewJG 11:05 on 29 Mar 16
"To be clear, none of the clients involved in that CommInsure story used advisers. The issue was between the client and CommInsure. I suspect it is why the stories reached the media in the first place and into the gleeful arms of Adele Ferguson."
Andy G 15:01 on 24 Mar 16
"With respect to the author at the end on the day the claim will be settled according to the "lengthy legal document" full stop. It would be nice if every adviser had a personal relationship to senior management in a organisation who they could say "mate - this is a real sad case, you reckon you could sort it out for me?", what next - "I'll but you a couple of drinks next time we catch up for lunch..." Maybe the author does have these relationships and good on him for his clients sake, but the responsibility in this case lies with the fraudulent misconduct in the institutional claim process. Blind freddy can see that. Makes me wonder if the author is less critical because he has those special relationships of his in mind."
David P 14:34 on 24 Mar 16
"Joel, a adviser is NOT a qualified or registered medical practitioner. For the adviser to be jointly responsible (per your response) the adviser would need to be in a position to be able to assess if the medical definitions in the policy were out dated. What resource do you use when you review your client's insurance policy for any out dated medical definitions?...and further more, as per the regulations, do you put your advice (as to the medical advice) in writing to your client? "
Marcus 14:31 on 24 Mar 16
"I'm not sure if the adviser should be held responsible in the comminsure case. I just can't believe the cba behaved that way. Completely out of touch with the victims and asking Drs to change their diagnosis?!? It's just incredulous. Where on earth do people come up with that as a tactic or strategy to deal with a claim? Heads should role. Seriously. Who at the bank thought up that response? Get us a name Adviser Ratings - if you truly are in it for the consumer!!"
Disgusted 13:59 on 24 Mar 16