September 12, 2019
At a critical time where the future for risk focussed advisers and risk-focussed advice businesses is uncertain, AFRM Claims Advocacy’s Bruno Muraca has shared his observations about what’s actually happening today at the coal face of life insurance advice and claims services…
Impact of Regulatory Change
The volume of change across the industry is notable, and the impact on advice practices is significant. Advisers in the back half of 2019 are balancing the need to drive revenue whilst demonstrating additional value to clients. This has always been a consideration, but recent legislative changes, including changes to commission structures, are all placing greater emphasis (and pressure) on this equation.
Demonstrating value for some practices has resulted in a review of their value proposition and in turn their service packages to their clients. Given the trust deficit in the industry, understanding of the right (tailored) advice and peace of mind continue to be a priority for most clients.
Four Key Challenges
In the second half of 2019, the four main challenges facing risk-focussed advisers and advice businesses, in particular, are:
- Time constraints, capacity limits – any free time for advisers is disappearing
- Business cost pressures – increasing business expenses, reducing revenue
- Consumer trust deficit
- Ability to demonstrate client best interests have been met
Practice capacity is being stretched further with additional legislative requirements, and practices are altering their team functions to focus on reducing lapse rates, re-activating inactive and low-balance clients as well as driving new business.
In addition, practices are revising their service packages in preparation for the changes in commission structures and to address the industry trust deficit.
Rise of Mental Health Claims
In addition to industry changes, awareness of mental health and the incidence of mental health has increased. According to The Blackdog Institute, one in five Australians experience mental health problem in any year. This is also reflected in claims as either the primary cause of the claim or as a secondary illness (eg. broken leg, but member is home, losing their sense of purpose and contribution and therefore develop anxiety and a mental health problem).
It takes trained professionals to deal with clients with a mental illness. Advisers don’t have, nor are they expected to have, the capability to deal with mental health claims as a primary claim or secondary illness. Experience shows that the claim experience is measured by both the primary injury/illness as well as the secondary. This takes nothing away from the adviser/client relationship acting as an informal soundboard during the claim – which is very important.
one in five Australians experience mental health problem in any year
Other Claims Issues
There has been an increase in the number of claims that have been identified by advisers at client review time, ie asking the client the question if they have experienced an injury or illness that has precluded them from working since they last met. Surprisingly, even clients who are reviewed every year, and who seemingly understand their insurance cover, overlook informing their adviser of the injury/illness that has prevented them from being able to work.
For new clients and at the review of existing clients, advisers are recognising that having an expert claim advocacy service offering as part of their service proposition helps deliver peace of mind, and demonstrates value to clients. As a service offer it supports the client conversation when introducing or positioning insurance; but also helps to address the trust deficit in the industry and leads to better consumer ‘buy-in’ to the advice. Fortunately not all clients go on claim, which supports the commerce of including a claims advocacy service as part of a service offering.
Legacy Claims Issues
According to the Australian Financial Complaints Authority, practice time pressures are likely to continue and advisers should expect an influx of legacy personal insurance claims dating back to 1 January 2008. The expectation is that advice practices will have the first responsibility to deal with retrospective complaints via internal dispute resolution procedures.
AFRM Claims Advocacy recognises industry challenges are here to stay and need to be bedded in and we look forward to supporting advisers and practices to prepare for these industry challenges.
Bruno Muraca is Chief Executive Officer, AFRM Claims Advocacy