Advised Insurance Best for Claims

Advised life insurance has a higher rate of admitted claims than non-advised insurance across all four product types, according to new data released by ASIC and APRA.

APRA Member, Geoff Summerhayes

The two regulators released the data as part of the second phase of an ongoing project to collect and analyse claims data from all life insurers to establish a consistent public reporting regime for claims outcomes (see: Regulators Begin Collection of Claims Data).

The data, which covered life insurance claims and claims related disputes for the period 1 January 2017 to 30 June 2017, found the admittance rate for advised insurance for death cover was 98 per cent compared with non-advised at 88 per cent.

Similar figures were reported for Income Protection cover with admittance rates for advised insurance at 95 per cent compared with 83 per cent for non-advised insurance. The gap closed with trauma insurance where the advised insurance admittance rate was 87 per cent compared to the non-advised rate of 84 per cent.

The difference for TPD cover was much wider with advised insurance having an admittance rate of 86 per cent compared to 67 per cent for non-advised cover, however, the regulators stated there was a relatively low level of claims in the non-advised area which would contribute to more volatility in results.

The data released by ASIC and APRA also showed that group life admittance levels were very high, and on par with advised life insurance in the areas of death cover (98 per cent), TPD (84 per cent) and Income Protection (96 per cent). Figures for Trauma cover were not released due to the small volume of claims reported in the group life sector.

The data also found that more than 90 per cent of claims that go to decision are paid in the first instance, echoing similar findings from the first phase of the data collection project (see: Regulators Confirm High Levels of Claims Acceptance).

Specifically, ASIC and APRA found that 97 per cent of death claims were paid in the first instance, as were 95 per cent of Income Protection claims, 87 per cent of Trauma claims and 84 per cent of TPD claims.

The total number of finalised claims fell to 66 per cent when compared to the total number of claims reported (see table below), a lower rate than the first round of 82 per cent, while the number of claims undetermined at the end of the data gathering period climbed from the first to second phase.

ASIC and APRA stated this was due to the second round of data gathering taking place over a shorter reporting period with a commensurately lower number of reported claims.

Table 1: Claims data gathered in Round 1 and Round 2 by ASIC and APRA

Claims Outcomes Round 1
(Jan ’16 to Dec ’16)
Round 2
(Jan ’17 to Jun ’17)
Number Ratio Number Ratio
Claims reported 126,300 71,170
Claims finalised 103,100 82% of reported 47,069 66% of reported
– Claims admitted 95,000 92% of finalised 43,920 93% of finalised
– Claims declined 8,100 8% of finalised 3,149 7% of finalised
Claims withdrawn 6,400 5% of reported 4,604 6% of reported
Claims Undetermined at End of Period 16,800 13% of reported 19,497 27% of reported

 

The new data also revealed that around 75 per cent of Death, Trauma and Income Protection claims were paid within two months and around 90 per cent of claims were paid within six months while only a third of TPD claims were paid within two months and two thirds within six months.

ASIC and APRA stated they would proceed to the third phase of the data gathering project and establish an ongoing reporting regime including the regular publication of comparable data at an aggregated industry and insurer-specific levels.

Commenting on the data APRA Member Geoff Summerhayes said, “APRA is fully committed to the development of this important new data reporting regime. The community expects the life insurance industry to be transparent and accountable for its conduct – it is said sunshine is the best disinfectant, and we are shining a light on the industry’s claims performance”.

  • emkay

    so perhaps now ASIC can stop the IFA witch hunt?

  • Phil

    Gee whiz, what a surprise. We’re heroes for helping our clients settle their claims in a more timely & successful manner – whilst still being vilified for taking those ‘evil’ commissions. This is the biggest justification for advisers AND commissions. As I’ve previously stated, it has sometimes taken 40-50 hours of my time to achieve a successful outcome for my client at claim time. No RCTI required to be paid by the client or their surviving family, for my time. My ongoing recurring commission income covering my time. They just don’t get it do they?

  • ken

    All I can say is the life offices better get use to dealing directly more often with clients and try a bit of empathy and sincerity in their talks to these people that have relied so heavily on guidance from their advisers when they where down and in trouble.
    With restrictions in commissions, longer responsibility periods, mountains of compliance and now further ridiculous education requirements the advisers simply wont have time to do what they have done in the past. I have no doubt that FOS or the new regulation board { whatever its called ? to many changes to keep up with } will be over run by claimants not getting what they deserve in a timely manner or perhaps at all.
    These people are not just a number and should never be treated as such but with the conversations I have had lately with some claims people they are going to be in for a shock when they get a taste of the real world.