If the recent scandal at CommInsure has taught us anything, it’s the value of having a financial adviser at claim time.
That may not seem like the case at the moment given that advisers have become targets for some media commentators who are arguing, once again, that adviser-led “policy churn” is a major factor in the current situation. But as Association of Financial Advisers chief executive Brad Fox put it shortly after the news broke, “Financial advisers are not, and never can be, responsible for the underwriting and claims decisions of life insurance companies.”
Fox compared the idea to “blaming a petrol station for a driver who chooses to speed,” arguing that “the two are unrelated and it is nonsense to try and connect them.”
More than shifting blame, though, it’s important to note that advisers can actually have a critical and positive role in the claims process. This seems to have been lost in the dialogue so far: that one of advisers’ chief responsibilities is to assist their clients when making claims on life insurance policies – not to mention actually assisting clients in choosing the right policy at the outset.
One could argue that the entire purpose of the Future of Financial Advice reforms’ “best interest duty” was to ensure advisers had a legal obligation to add this kind of value – and if this is the case, it’s worth noting that at this point, insurance companies have no such obligation.
The discussion is changing, though: the Senate Economics References Committee has recently reopened submissions to the Scrutiny of Financial Advice inquiry, widening the scope to include a deeper investigation of Australia’s life insurance industry.
Among the key points of the new inquiry are a call for further oversight of insurers, determining the extent of unethical practices to avoid paying claims in the past and determining whether an insurer “code of conduct” is required (one imagines there would be some cooperation with the Financial Services Council in this regard, since they have been drafting a similar code for some time now).
Other advice groups are taking a more direct role in remedying this issue: Synchron, for instance, has worked with AIA Australia to develop a new fixed term level life insurance product which in AIA Australia retail product manager Stephen Baxter’s words will provide “greater certainty to clients, consumer affordability, a range of options after the fixed-term and guaranteed renewability.”
Ultimately, though, consumers need to remember that, as with most long-term financial decisions, having an adviser at your side will actually improve outcomes, and it’s not unreasonable to estimate that the vast majority of those affected by the recent news were unadvised.