If risk commissions are banned, will your practice charge a fee for providing your services at claim time?
- Yes (86%)
- No (8%)
- Not sure (6%)
As we await the outcome of the closest federal election in recent history, we look ahead to one of the areas that would be impacted if risk commissions are banned.
Our latest poll question is:
If risk commissions are banned, will your practice charge a fee for providing your services at claim time?
If the Labor Government is returned, we will see the continuation of the Future of Financial Advice reforms consultation process, where one of the key questions being asked is whether the proposed ban on commissions from 1 July 2012 should also include commissions on risk products.
If advisers are effectively forced to charge a fee for the insurance advice they provide, does this mean charging fees will also extend to the claims process?
Many advisers consider it a privilege to be able to assist their clients navigate their way through making a claim on their policy, whether that process is difficult or easy (and it’s not often easy!).
But while the thought of charging fees to clients who have submitted insurance claims is a foreign concept to many, possibly most advisers, it is a process that already takes place within some advice practices because of how they are set up.
For example, there are practices that will provide initial contact between client and insurer before offering the client the choice of either conducting the rest of the claim process on their own or involving the advice practice for a fee that reflects the level of their involvement.
Many advisers have pointed out that the commissions they receive on all the policies they write subsidise the often substantial time and effort that can be involved in helping those clients who make claims.
If risk commissions are banned and all clients are charged fees for the insurance advice they receive, many advisers have been questioning how they will be able to afford the time it takes to properly serve their clients’ needs at claim time.
Will some advisers strike agreements with their clients to extract a proportion of the claim benefit payment as their fee? Will other advisers choose to, or be forced to consider charging a fee, irrespective of whether the claim is successful?
Are there alternative solutions? Are there methods advisers use now to help their clients at claim time that will still be effective if risk commissions are banned?
We’d like to know what you think.
Add your comment now
9 Comments
We need to keep emphasing that as Advisers we have 3 distinct roles and they are initial consulting,placement of the risk business,and lastly the most important role is the mediator between our clients and the Insurers at claim time.
We must and should be paid for each role we take.
I have been in the industry for over 54 years.
1.Labor has lost. Good ridence [Ruddance]
2.We must continue to let the world know what we actually do. I am more than ever convinced that only we know what we do!!
3. No commission = claims cost to clients who we currently do not charge for this sevice. However, will be up to every practice to develop its own client offer.
The role of an adviser is to ensure the financial security of a client and thier family in an event. If they receive a commission, then this is generally for the sale of the product. In the event of a claim, an adviser can act as an intermediary initially, but if the client requests a specific involvement beyond this, then the adviser is entitled to be paid for the time. General courtesy is foremost, but feeding your family and meeting expenses is also important.
For any adviser that has really been involved in managing client claims, I mean throgh the whole spectrum of insurances, ie, T&PD, Trauma, IRP and Death, especially handling really difficult T&PD and IRP claims involving younger clients with depression, chronic fatigue and the like, which can take up to a year or more to complete, it is a no barainer, you just have to charge a fee. I suggest that the client is made fully aware from the very beginning of of insurance discussions,it is stated in the SOA and the Welcome letter when the insurance policy has been issued and even in some of one’s client newsletters and client reviews.
We have had no resitance from clients when we have had to charge a fee when the claim application period elongates. For some of the more involved cases, one can have 5 to 20 pages of claim notes and heaps of long distance calls with the claims officer,client and other related parties which can equate to over 20 or more hours of work.
Ah grasshopper. The difficult questions first.
Firstly, I agree with one of the above comments that only life risk advisers actually know the whole gammut of what it is we provide to our clients. I get particularly annoyed by some of the comments in previous blogs where advisers who are clearly not primarily risk focussed blab on about fees for claims, cost centres etc.
I don’t know what anyone else does, but in the 23 years I have been a life risk adviser, I have always engaged in every facet of the claims process. I annoy the hell out of Claims sections by insisting claim forms be sent direct to me, not the client,( how many claim forms ask the same qustion 3 times ) The client at that point in time is usually suffering great emotional and financial stress. If the client is mobile, they drop into the office to complete the forms and provide financial documentation; if they are not mobile I visit them wherever they are-hospital or home. I have conducted one claim while on holiday in NZ, another client had his claimed managed by me for 15 months while he was living in Thailand
Part of my role at that point in time of the initial claim form is to assure the client that the income protection policy will actually work ( while being careful not to bind the insurer ), explain the provisions of the policy and how the claim should proceed, and immediately form a contact point with the appropriate claims officer.
That’s only the first part. I then take it upon myself to try and prevent that client from stressing out if delays are involved - delays usually caused by others who can’t do their job properly,or who have other prioities, such as accountants and doctors.
If I sense that a claim is going pear shaped, I then begin a process of liaising very closely with the Claims area. I am normally very co-operative in my dealings with claims officers, but all hell can break loose if I sense the client is not being treated fairly or a fishing exercise is underway.
I currently have 2 claims which have been going for in excess of 10 years, and in one case will go on for another 30. Both of those claimants had problems with the insurance company. The longest running of these two claim (nearly 15 years ) involves a Victorian resident and chronic fatigue and a partial disability claim in which the particular insurer has twice tried to cancel the claim on very spurious grounds,such as claiming the claimant was no longer disabled in any way, causing huge grief and distress, once just before Xmas. Another time, the same insurer claimed that too much partial disability had been paid over a 12 month period - they apparently thought the partial disability formula was 12 times A minus 12 times B etc. No further explanation is required.
Anyone who proposes to charge someone to assist them in getting a claim paid, in particular an income protection or TPD claim, hasn’t the right to put up a shingle to call themselves life risk adviser. Same goes for those who want to take a percentage.
AS FAR AS I AM CONCERNED, IT SHOULD BE AN ARTICLE OF FAITH FOR EVERY GENUINE LIFE RISK ADVISER NOT TO SEEK TO RECOVER COSTS FROM CLAIMS, NO MATTER HOW LONG THEY GO FOR. That’s why life risk advisers are in the business - it’s not the policy or the premium, the policy is the claim.
Needless to say I have had many referrals from friends and relatives of people who I have helped in claims.
One of the duties that all life risk advisers have to perform is to examine and understand the correspondence between the insurer and the claimant. Often these are accidently misleading ( a by-product of poorly trained staff and word processors ), if not deliberately misleading.
For example, the same insurer as above recently paid a crisis claim for a heart attack with a lump sum equivalent to 6 months of monthly benefit. Fantastic. Problem was, the accompanying letter to the claimant not only provided tax advice, but incorrect tax advice. There is a well known ATO ruling which states that Crisis benefits paid in a lump sum in advance, regardless of disability, are not assessable for tax purposes. Not only did I have to convince the client, I had to do the accountant’s work as well.
A few years ago, the same insurer paid a claim by a doctor for disability as a consequence of a mild heart attack. The client was off for 2 months, received a cheque for one month of monthly benefit after allowing for the 30 day waiting period, and the case was closed by the insurer. I wasn’t the adviser. I became aware of the error when the claimant’s husband became a client of mine and showed me the correspondence from the insurance company, the import of which had been missed by the claimant’s original adviser, either because they hadn’t read the correspondence from the insurer to the claimant, or didn’t understand the provisions of the policy. That heart attack victim is now my client and $35,000 richer. Yes-in this case, and only this case, I charged a $250 fee, which was happily paid.
Do I charge my claimants a fee on a regular basis - no. Do I believe I have an entitlement to charge a fee for administering claims - no.
Clearly, we have failed as an industry to sell what it is we do to those who don’t understand and don’t care what it is we do. I am not sure why that is, but one thing is for damn certain - the professional bodies who purport to represent all advisers, including life risk advisers, have too much of a focus on investment advice and have failed miserably to represent the value of life risk advisers, particularly at the time of claim.
How the hell we fix that I don’t know. But unless Abbot seduces the Independants and gets into the Treasury benches, we are pushing you know what with a sharp needle, uphill
Dear colleagues, I feel certain that the banning of risk commission would lead to new methods of paying the adviser. As well as direct fee for service (for the few who would pay it), the life offices would offer financing options for clients that the ‘advice’ payment be included in the monthly premium cost etc. The life office would then pay the adviser the insurance implementation fee as well as the ongoing adviser service and policy administration fee. These would typically be as in the past multiples of the premium i.e. x 110% etc on intial and 11% on renewal. This would be spelled out on the quote and included on the back page of the application form. We will never see this business become a time based fee for service (hourly rate) type of business - I am sure of that, in any event I suspect that commission on risk insurance will not be banned, I have spoken to many industry sources as well as politicians and they are not in favor of doing so as the system is working well - and life insurance remuneration has not created public scandal in the manner of other financial products.
Congratulations to Bill B for his concise and accurate explanation of what it is Risk Advisers do for their clients.
Only advisers who specialise in Risk,know the huge work load that is required to properly do our job,which involves a substantial amount of time fixing mistakes and often teaching inexperianced staff at Insurance Companies,how their policies work.
In addition, we are having to continually call claims departments to push them along to finalise the jobs that were promised by a certain date to take the claim to the next level,only to have the job mishandled or lost.
How would we charge clients a fee for stuffups that should not have occured,which has still cost us many hours,when clearly the responsibility lies with the Insurance Company.
I can guarantee the Insurance Company will not pay us so why should our clients?
We have not charged our clients for any of the claims we have helped with over the last 23 years,though i can tell you that if Commissions are banned,there will be less clients getting the correct levels and types of Insurance and by default,less representation by advisers at claim time.
It is putting the cart before the horse when talking about charging a fee at claim time,when clients will not pay a fee for us to advise,then implement the correct Insurance coverage in the first place.
The argument becomes mute,as the Insurance will not have been written,so no claim will need to be paid,hence another bankrupt family for the Government (sorry,tax payers) to pay welfare for years to come.
Looking after a client at claim time is one of the most important services we can provide them, but it can also be time consuming. So if we’re forced to charge a fee for service, then I guess there would have to be a fee charged to mediate the claim.
Frankly, this is unappealing, but if the government removes the choice on how our clients pay for our services, then this is the route most of us would have to take.
If commissions are banned on risk products most of us will not charge a fee for a claim because we will not be in business. How many of you would survive if commissions were banned? I cannot see the public paying a fee for service on top of the premium for risk advice.