March 1, 2013
In this claims case study, a couple, both medical practitioners, who were referred to the adviser for a review of their insurances discovered they were entitled to an additional claim payment. It demonstrates the value an adviser can bring at time of claim, and why clients need to notify their adviser of any occurrence they believe may lead to a claim.
At a glance
Submitted by: Bill Brown, MDRT member
Business name: Lifestyle Advisers
Licensee: Charter Financial Planning
Clients: Husband and wife, both doctors
Claim type: Income protection – critical conditions benefit
About six years ago, a doctor client referred a medical colleague to me for a review of his existing life risk plan.
The referred doctor (Doctor A) visited me, armed with his existing policies and with a question as to the availability of better contracts in the market. After the necessary data collection, we moved to discuss the key features of his “legacy” income protection policy.
I outlined the policy features, and discussed presumptive disability benefits – specifically the crisis/critical conditions benefit, whereby multiples of monthly benefit are payable immediately on diagnosis of certain medical conditions, without the need to prove disability or serve a waiting period. I used a heart attack as an example, noting that insurers were contractually obliged in most quality contracts to pay the benefit (usually six times the monthly benefit) in a lump sum, without evidence of disability. I added that this lump sum was generally not assessable for tax purposes as income, provided the insurer had previously obtained an appropriate tax ruling.
Surprisingly, Doctor A challenged my statement. He related how his wife, also a doctor, and who held an identical policy to him, had suffered a relatively minor heart attack 18 months before. She had been off work for two months and with a 30 day waiting period, had received one month of benefit, totalling about $6,000.
At my invitation, Dr A revisited my office, this time with his wife’s income protection policy document. It was a closed “legacy” contract, now over 10 years old. The policy was now being administered by a different insurer, the second life company to own that book of business.
On examination of the policy and claim documentation, I was able to confirm that the insurer had not paid crisis benefits in accordance with the policy provisions.
There was evidence that there had been minimal involvement by the introducing adviser in the claim process, who apparently had either not read a copy of the insurer’s letter to the insured, detailing the particulars of the claim benefit being paid, or had failed to appreciate the particular provisions of the policy.
I successfully negotiated with the insurer, and the remaining five months of benefit entitlement ($30,000) was paid immediately, accompanied by an apology from the insurer. Both Doctor A and his wife were most appreciative of my professionalism, and have subsequently referred their colleagues to me.
To be fair to the introducing adviser, Doctor A’s wife contacted the insurer direct in the first instance; not the introducing adviser. While advisers are routinely provided with copies of claim correspondence by this particular insurer, it should be noted some insurers do not provide copies of such correspondence unless requested. Sadly, there are also advisers who instruct insurers not to involve the adviser in claims.
What’s to be learned here?
- Advisers should instruct clients to contact the adviser in the first instance if they believe they may have a claim.
- Advisers must be totally involved in the claim process, and not delegate to untrained staff.
- Advisers must understand the provisions of the particular policy.
- Advisers should recognise that insurers can always make mistakes in the calculation of claims, particularly those claims involving “legacy” income protection contracts. Accordingly, it is imperative that advisers cross-reference all claims correspondence from insurers to claimants to the appropriate policy document.
I maintain it should be an article-of-faith for true risk advisers to be totally involved in the client’s claim processes. If advisers have no passion for risk, please rebate your renewal (servicing) commission and leave the provision of service and advice on life risk matters to those who really care for their clients.