riskinfo » Case Studies

Case Study – CFP v Couper

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May 6, 2014

This legal case study deals with a client who switched his life insurance cover from one company to another, on the advice of his adviser. He was left uninsured when the new insurer voided the contract due to non-disclosure issues. The court concluded that the adviser was negligent and engaged in misleading or deceptive conduct, in that he was too hasty and failed to sufficiently impress upon the client the risk he took replacing one policy for another. BT’s Senior Product Technical Manager, Katherine Ashby, examines the case and identifies the key learnings for advisers.

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At a Glance

Submitted by: Katherine Ashby
Role: Senior Product Technical Manager, BT Life Insurance
Topics covered: insurance replacement advice

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In Detail

Background

Over the summer break we saw the conclusion of a controversial long running court case involving one of the big four banks and insurance replacement advice.

The case quickly became referred to as ‘the churn case’, as many lawyers and industry commentators linked the case with inappropriate advice practices and churn concerns recently highlighted by ASIC.

For advisers, perhaps this case could be more accurately described as an ‘advice process case’ – as although the facts presented themselves as a case about responsibility for non-disclosure, at the core of the case was the underlying issue of whether the advice given was adequate and appropriate in the first place.

On the surface, the product advice doesn’t raise too many alarm bells, but throughout the court proceedings it became apparent that the adviser failed to properly discharge his responsibilities when providing written advice to cancel one policy and replace it with another – and that’s where the problems arose.

Case study facts

The client went to see the adviser in September 2010, where the adviser found the client did not have any assets, meaning the only advice opportunity available to him was a review of the client’s existing life cover policy. The policy had been in force since 2003.

The adviser recommended the policy be cancelled and replaced with a policy issued by the same institution for which he was employed.

Policies

The Statement of Advice (SOA) listed the standard risks to the client, which included the following:

Do not cancel your existing policy until the new one is in place
The insurer may not pay a benefit if you do not comply with your duty of disclosure
You will be required to provide health and financial details and the law requires you to disclose all the information you know that is relevant
If you do not, the insurer may void your cover or prejudice any claim.

Neither the adviser nor client knew about the three-year period set out in the Insurance Contracts Act s29(3), which allows insurers to void contracts that they would not have entered into had a misrepresentation not been made. As such, the adviser did not warn the client of this.

The client accepted the recommendation and the application was completed electronically via the e-application. The adviser completed the application, and stated that he verbally asked the client every question on the application, however, the client maintains he was not asked any questions about his health. All health questions on the application were answered ‘no’. In addition, the fact-find listed the client’s health as ‘excellent’.

What happened next?

One year later, the client was diagnosed with pancreatic cancer and two months later he was classed as terminal. He then made a claim and the insurer avoided the policy claiming non-disclosure. Among other issues, the client’s recent medical history showed the following:

Reflux
Raised LFTs
Heavy drinking (approximately 8-10 heavy beers per day, as opposed to the 8-10 standard drinks per week, as indicated on the application)
Heavy smoking for over 10 years, however, the client appeared to have ceased smoking 12 months prior to his the application
Referral to a specialist, which the client had not followed through with

Court proceedings

The client first sued the insurer, however, was unsuccessful. It is clear from his recent medical history that had the above medical issues been disclosed by the client, the insurer would not have offered cover.

Following the initial ruling, he then successfully went on to sue the advice provider. As a result, the advice provider was forced to pay the client’s life cover sum insured as well as additional costs.

Finally, the case went to appeal in December 2013, and the judgement against the advice provider was upheld.

Reasons for the judgement

The client was successful as the court found the adviser gave written advice that was misleading and deceptive. The judgment highlighted three key areas:

Failure to advise the effect of the Insurance Contracts Review Act 1984 (Cth), s 29(3)
Insufficient information at the time of advice to allow a proper comparison
Inability to recommend a competitor’s products.

Insurance Contracts Review Act

Neither the adviser nor client knew about the three-year period set out in the Insurance Contracts (IC) Act s 29(3), which allows insurers to void contracts they would not have entered into had a misrepresentation not been made. As such, the adviser did not warn the client of this, verbally or in writing.

The IC Act sets out the remedies available to insurers if a client has not disclosed all relevant information. In the first three years of the contract, a policy can be voided if the insurer can show it would not have offered cover had the client fully disclosed all relevant information.

The non-disclosed issue does not have to be the reason for the claim – it just needs to be a reason the insurer would not have offered cover. After three years, s 29(3) does not apply and an insurer needs to prove that the non-disclosure was fraudulent or the misrepresentation was made fraudulently (s 29(2)).

As the client’s existing policy had been in force for many years, he was well beyond the three-year period. The judgment stated:

“Although the SOA did disclose the risk of avoidance for non-disclosure, it failed to disclose the important effect of s 29(3)… s 29(3) was, in the adviser’s words, “news to me”.

…In circumstances where in truth there was very little material difference in the policies, that statutory difference was very material to the decision Mr Stevens was being asked to make. It was misleading and deceptive to advise him to do so without drawing it to his attention.”

Hence the court found that the impact of this legislation was actually the biggest material difference between the policies, and should have been disclosed as a lost benefit in the policy comparison.

Proper comparison

The comparison between the new and old policies was incomplete. Along with the failure to disclose the impact of the IC Act above, both a premium and benefit comparison was criticised.

The SOA provided the reason for the replacement advice as “existing life insurance more expensive dollar for dollar and no trauma insurance within the existing policy”. The court found this statement could not be made, as the adviser was not in a position to know if the new insurer would accept the client and if so on what terms. There needed to be some qualifications made around that statement, so that it was clear it only applied if the client was accepted at standard rates.

The adviser’s comparison of premiums was confined to the first year

The court was also very critical of the adviser’s premium comparison:

“The adviser’s comparison of premiums was confined to the first year. But he was attempting to sell a product designed to last a lifetime. It was misleading to confine his comparison to first year’s premiums. Further, it would be necessary to take into account the facts that (a) the benefit payable under the existing policy increased (subject to a direction to the contrary) by 3% per year and (b) the structure of the premiums (stepped or level) under the existing policy. There is nothing to suggest that the adviser even made an inquiry as to that structure.”

Finally, the adviser did not make any policy comparison at benefit level. He admitted in court that he had not researched the existing policy, nor sourced a copy of the policy document. Although the policies were in essence, quite similar, the adviser still had an obligation to do so.

Inability to recommend a competitor’s product

This last point is interesting and perhaps raises the most questions. The adviser asserted in court that he was not permitted to recommend the competitor product, nor recommend the client maintain his existing cover.

The court used this statement, and the alternative strategies from the SOA to make this point. The SOA listed two alternative strategies:

Self insure – insufficient capital/equity to self insure
Full insurance review – client declined.

The judgment was very critical and refers to these alternatives as “absurd”. It questions why the most obvious alternative – to just replace the life cover and have a lower premium (of $1,097) – or otherwise, to maintain the existing policy, were not considered. The conclusion was made regarding the latter that this was because it was not allowed by the licensee.

This point is jarring as it is common to recommend that cover be left in force, even though that product is not on the Approved Product List (for example, employer or industry super fund cover). Hence we would question whether this was the actual advice process, or whether it was simply the impression the adviser was left with by his superiors.

Other facts of the case

The use of para-planning was continually criticised and was not helped by the fact that the SOA had only one sentence of personalised advice and many errors.

there were no diary/file notes, which meant that the adviser had no evidence to prove his version of events

Worse still, there were no diary/file notes, which meant that the adviser had no evidence to prove his version of events. All aspects of the case, such as what was said, whether the SOA was presented and whether any verbal warnings were given, effectively came down to his word against the client.

It was noted that the adviser had to carry out this process hundreds of times a year, as opposed to the client, who had only done it once. Hence without supporting evidence, it seemed that the court would be more likely to take the word of the client.

Finally, even though it was not central to the case, without diary notes or any documentation, the adviser could not prove who completed the application. Proof could have been supplied if the adviser had asked the client sign a copy, provided a copy to the client or, of course, supplied diary notes. Any record of conversations that took place during the appointment would have added depth to the interactions and shown corroboration.

Key facts to take out

Written advice to replace a policy based on premiums needs to include reference to any conditions on which the advice rests – for example, acceptance at standard rates. Further, it must include reference to the structure, stepped or level, and consideration beyond the first year.
If replacing a policy that is more than three years old, the effects of the Insurance Contracts Act s 29(3) should be outlined as a lost benefit.
When stating an alternative strategy, advisers will need to be careful to ensure that if more feasible strategies are available, then those should be outlined, rather than the generic alternate strategy, “self-insure”.
Consider methods to ensure that you can prove the client was asked the application questions, whether that be through:
- Using an insurer that provides a copy of the application to the client
- Documenting conversations that took place during the application in a file note
- Simply printing a copy of the application and asking the client to acknowledge that all answers are correct.
As always, never offer advice that won’t be of benefit to the client.

On the surface of this case, when comparing the two policies, it appeared that there was every reason to recommend a replacement. However, the case ultimately came down to whether the advice was misleading or deceptive, and whether the advice was appropriate given what the planner ought to have known.

Ultimately, regardless of who completed the application, who was responsible for the non-disclosure, or that the evidence supplied by the client was at times referred to as “unreliable” – as the adviser had not fulfilled the necessary requirements for replacement insurance advice, the client had grounds to successfully win the case.

For further assistance please contact your BT Life Insurance BDM or lifetechnical@btfinancialgroup.com

To view a copy of the case notes, click here.

Case Study – Insurance For Miners

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April 3, 2014

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This case study, provided by AMP, looks at some of the issues insurers need to address when considering the insurance cases of mining employees.

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At a glance

Submitted by: AMP
Client name: Tony
Client occupation: Mining engineer
Cover applied for: AMP Elevate income insurance benefit of $11,250 per month

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In detail

The client

Tony* had heard about the mining boom in Western Australia from friends and, with his experience of working in the mines in Queensland, didn’t want to miss out.

After securing a hands-on mining job as an engineer in the field, Tony consulted a financial adviser. He intended to work in Western Australia, given the current demand for his skills, and his job provided him with an income of $180,000 per year.

As well as putting in place a comprehensive investment strategy, Tony’s adviser suggested he take out an insurance package, including income protection. Because of the nature of his employment contract, Tony purchased an income insurance plan with a 30-day waiting period, a benefit period to age 65 and an insurable benefit of $11,250 per month.

Underwriting considerations

“When looking at Tony’s application, the case underwriter took into consideration his occupation and specific duties. For a hands-on engineer we’d expect to see his duties include things like site inspections, office work and light manual duties,” said AMP Chief Underwriter, Debra Pitcher. “But if his application had included, for example, heavy manual work, we would have needed to go back and check his occupational rating.”

“We also considered Tony’s work hours and the nature of his role. Given that Tony worked in the mining sector, we were not surprised to see him quote varying work patterns, such as longer than normal hours, both at work and away from the site on a break. For other occupations we might question these conditions, but we understand the way people work in and around some mines, such as flying in to work for a couple of weeks and then flying out home again to spend time with their families.

“Due to work constraints, it’s often hard to contact people who work in the mining industry, so it’s really important to ask the right questions up front,” Pitcher said.

it’s really important to ask the right questions up front

Making a claim

One Sunday, Tony was bushwalking in rugged terrain close to the mine when he lost his footing on a narrow cliff track. He fell several metres down the cliff face, landing on a rocky ledge.

His injuries included a ruptured Achilles tendon, which required surgery. He was airlifted to Perth, where he spent a week in hospital. It was almost three months before Tony made a full recovery and was able to return to the mine.

AMP’s Head of Claims Operations, Ben Vanden Boom, said for cases where the treating physician has certified the insured off work for a specific period of time due to an injury, or if there is a reasonable expected return to work date, the claims assessor will often discuss with the insured whether their claim benefits are appropriate to be paid and finalised up front. This alleviates the need for ongoing medical certificates and paperwork and finalises the claim for the insured with little fuss.

“Tony received four weeks of sick leave pay from the mining company. Following the four-week waiting period on his plan, his income insurance payments allowed him to pay ongoing living expenses for the last two months of his recovery,” Vanden Boom said.

Case Study – Why I Became An Adviser

Admin

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March 1, 2014

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Risk Management, Estate Planning & Business Succession Specialist, Mark Everingham, watched his family struggle financially after his father suffered a heart attack. In this case study, Mark talks about his father’s TPD claim experience, and how this has impacted his own business.

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At a glance

Submitted by: Mark Everingham
Business Name: Personal Risk Professionals
Years in advice: In finance since 1995, advising since 2001
Claimant: Bill, Mark’s father
Claim type: TPD inside superannuation

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In detail

The oldest of four children, Mark grew up in a fairly ‘traditional’ family, where dad worked and mum stayed home to raise the kids. At age 20, Mark had just started his financial services journey, working for a credit union, and was yet to give much thought to a career as a financial adviser. But this all changed when his father suffered a heart attack.

“Dad had a heart attack in December 1996, and had triple bypass surgery in February 1997,” Mark recalled. “A whole range of complications occurred after that, including further bypass surgery, hernias, etc. He ended up permanently incapacitated as a result.”

How would she provide for the family? That image is burnt into my mind

Mark watched as his mother sat next to his father on the hospital bed after the first bypass operation: “Dad was covered from head to toe with what looked like alfoil, with tubes everywhere. He looked like he was dead. But it was the look on mum’s face that has really stuck with me. It was the shock of facing the complete unknown. She had no idea what would happen if dad didn’t survive. How would she provide for the family? That image is burnt into my mind.”

After returning home from the hospital, Mark’s father, Bill, was faced with not only the task of his own recovery, but managing the financial impact of all that had happened.

“Being told by the doctors that I couldn’t work came as a bit of a shock, because that’s what I’d always done,” said Bill. “I was very lost. Still to this day it takes a lot to get used to the fact I’m not going to work every day. I was very concerned about what was going to happen to Julie and the kids.

“You’re trying to deal with the illness, and the subsequent issues that can come from that, as well as the financial side of things. To have someone to deal with the financials, and not have to worry about it, would have been a tremendous help.”

Before the heart attack, Mark’s father had no knowledge of how he could protect himself and his family.

“It wasn’t that my dad was negligent in any way towards his family – he simply didn’t even know this kind of solution existed. Things are different now, because there are more advertisements for insurance, encouraging people to get their affairs in order. But 20 years ago, that didn’t exist.

“That lack of education meant he was completely unprepared.”

Bill was lucky enough to hold an account with an industry superannuation fund, through which he was entitled to a minimal amount of life and TPD cover. The benefit was just $15,000. But he had no-one to help him through the process of collecting that benefit.

“He was completely unadvised about what was in his super fund,” said Mark. “He was left on his own to try and get the proceeds out of the super fund and get the claim paid.

“He’s got a file as thick as two phone books of all the records he had to keep over the two and a half years it took to be deemed permanently incapacitated in order to receive the claim. That’s not a slight against the insurer or the super fund, that was just the nature of his condition.

“The amount of stress that put on him, to try and get what little amount of money was available to him, I think made his situation worse. That look on my mum’s face when she was in the hospital transferred over to dad when he was faced with trying to manage his own affairs, because he had no knowledge of how to go about it.”

The experience led Mark to seek out a career in financial advice, specialising in estate and succession planning.

“I knew I didn’t want anyone else to have to be put in the same situation as my dad. Not only did he not know he could have set himself up to manage financially if the worst should happen, but when it did, he had to go into ‘battle’ alone. It’s not that he was in a battle against the insurer or the super fund, but it was a battle against the great unknown.”

While Mark may not share his own story with every client he works with, it definitely impacts upon the way his business is run.

His advice model is built on two principles: education and support. His team helps to educate clients about how to effectively structure their financial situation to protect against risk, and then provides a support platform if the worst should happen. This process involves not only setting up insurances to fund the family’s needs, but also looking at the entire estate, and partnering with other professionals like accountants and lawyers to ensure the money gets to where it is needed.

When they know we’re there for the long term, that opens up two-way communication

“We talk about building an ‘insurance program’ with our clients. There’s so much more to be considered than just the insurance policy. We look at the whole estate planning picture, and provide ongoing management of that program to ensure it remains appropriate for the clients’ needs.

“Even at the end of that meeting, if they decide not to do anything further with us, at least they’re walking out the door informed.”

He urged all advisers to really think about why they were in the business of advice, and to use that to drive better client outcomes.

“We position our service as a partnership. We’re not just implementing a product solution and leaving the client to then deal directly with an insurer; they’re forming a relationship with us. If something does occur, we’ll be there to help clean up the mess. When they know we’re there for the long term, that opens up two-way communication.”

Bill added: “I didn’t realise for a long time that I’d had so much influence on Mark’s chosen career path, but when I did I was blown away. To hear the way people talk about him and what he does, or to see a letter from someone he’s helped, it just shows how much of an impact he has on other people’s lives. My wife and I are both very proud of Mark.”

Case Study – Ravesi vs National Australia Bank

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February 27, 2014

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In this legal case study, the client, Paul Ravesi, successfully argued that he was entitled to damages because his adviser, Peter Moore, an employee of the National Australia Bank (NAB), failed to take out the correct insurance policies on his behalf. Mr Ravesi suffered a serious accident, for which he was entitled to claim on his insurance. Upon lodging the claim, however, Mr Ravesi discovered that only half the cover he expected had been put in place.

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At a Glance

Source: Judges’ decision notes
Topics covered: insurance replacement advice, duty of disclosure

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In Detail

Background

The client, Paul Ravesi, and his business partner and de facto, Candace Torres, took out an overdraft loan of $50,000 for their business (Affinity) from NAB in July 2006. At the time, it was suggested that Mr Ravesi and Ms Torres should take out some insurance to protect the interests of the business should either party become seriously ill or injured. Acting on this suggestion, Mr Ravesi and Ms Torres were then referred to NAB financial planner, Peter Moore, to arrange insurance cover to secure the loan.

Mr Moore held an initial meeting with Mr Ravesi and Ms Torres on 11 August 2006, where he completed an initial fact find, and agreed to prepare some recommendations for insurance and business superannuation.

Disputed documentation

On 14 August 2006, Mr Moore provided Mr Ravesi with a document entitled ‘Fact Find and Needs Analysis for Paul Ravesi’. The document listed the business debt to be covered by insurance, and an assessment of the amount of money required to provide Mr Ravesi’s family with sufficient cash to maintain their lifestyle in the event of his premature death.

Mr Moore met with Mr Ravesi and Ms Torres again on 12 September 2006, to discuss his recommendations, contained within the Statement of Advice (SoA). At this meeting, the clients and their adviser discussed some small tweaks to the sums to be insured. Mr Moore’s notes from the meeting say that everything else in the SoA was to remain the same, and that he was to prepare a revised Personal Protection portfolio quotation to reflect the variation in sums insured. A quote was issued on 12 September 2006, proposing life cover standard for Mr Ravesi of $150,000, TPD and CI cover of $140,000, and income protection plus of $3750 per month. A similar document was prepared for Ms Torres based upon life cover of $250,000, CI and TPD of $240,000 and income protection plus of $3750.

On or around 25 August 2006, Mr Moore presented Mr Ravesi with a Statement of Advice (SoA) detailing his agreed protection insurance objectives. The SoA lists Mr Ravesi’s protection needs as:

$125,000 asset protection cover for the business
$150,000 revenue protection for the business
$50,000 family protection (death)
$40,000 family protection (TPD)
$40,000 critical illness protection
Income protection

Mr Ravesi’s signature appears on the Authority to Proceed, dated 28 September 2006. The Authority to Proceed recorded that the client had agreed to proceed with alterations to the original recommendation. This was conveyed by a check box, which it is understood was ticked by Mr Moore. Next to the box, Mr Moore wrote:

Key person revenue insurance $150,000 Death $140,000 TPD plus CI
Income protection as recommended.

Mr Ravesi argued that that section of the document was not filled in when he signed it, and that he did not tell Mr Moore that he no longer wanted the asset protection/personal protection component of the cover.

Policies issued

While the Authority to Proceed did not provide specific instructions to remove the asset protection/personal protection components in the Protection Insurance Recommendation, it was clearly understood by MLC to mean that Mr Ravesi did not accept that part of the recommendation. Mr Moore told the court that that is what the Authority conveys.

On the instruction of Mr Moore, MLC issued the following policies:

A policy in favour of Affinity, on the life of Mr Ravesi, and providing life cover standard of $150,000 and critical illness plus cover including total permanent disability cover of $140,000. The same policy covered the life of Ms Torres for both life cover and critical illness plus cover including TPD cover in the sum of $100,000 each. (Issued 30 November)
A personal protection policy in favour of Mr Ravesi with an individual income protection benefit of $3750 per month, with a waiting period of one month and a maximum benefit period of five years (issued 13 December)
A personal protection policy in favour of Ms Torres, with an individual benefit of $200,000 life and trauma, including TPD cover of $200,000 and income protection plus of $3750 per month (issued 13 December)

Letters from MLC to Ms Torres and to Mr Ravesi were sent on 14 December 2006, in respect of cover to commence on 13 December 2006 enclosing those schedules. The letter to Affinity was sent on 1 December 2006 in respect of its cover to commence on 30 November 2006, enclosing its schedule.

On 9 November 2007 and 8 November 2008, Mr Ravesi received an annual renewal notice for his policies.

Claim lodged

On 10 December 2008, Mr Ravesi was severely injured in a car accident. He notified MLC about the accident in December 2008, and lodged a claim on 12 February 2009. His income protection claim was admitted, and Mr Ravesi began receiving a monthly benefit.

Mr Ravesi believed he was also entitled to a personal TPD benefit. It was at this time he became aware that he had no personal protection/asset protection.

Court case

Mr Ravesi brought a case against NAB because he believed he was entitled to damages on the basis that he should have received a policy in his name and for his personal benefit of $140,000 for TPD. Such insurance cover, that is life cover of $150,000 and TPD cover of $140,000, had been recommended by Mr Moore, and Mr Ravesi says he accepted that recommendation.

Counsel for NAB, acting on behalf of their employee, Mr Moore, argued that Mr Ravesi and Ms Torres should have realised the incorrect cover was issued. According to NAB, Mr Ravesi and Ms Torres had adequate opportunity to identify the fact they had the incorrect cover, by way of the initial policy documentation, sent in December 2006, and the annual renewal notices, sent on 9 November 2007 and 8 November 2008.

A cautious advisor was likely to have recorded such an instruction, being a significant departure from the advice

In assessing the case, Judge Mansfield said there was no evidence to suggest any reason why Mr Ravesi might have given the instruction that he did not require the asset protection/personal protection cover originally recommended.

‘On 28 September 2005, Mr Ravesi says he did not instruct Mr Moore that he did not want asset protection/personal protection. Mr Moore simply says that he was told that asset protection/personal protection was not required and he accepted that,’ Judge Mansfield said.

The Judge continued:

‘I find it curious that Mr Moore simply accepted Mr Ravesi’s assertion, if it was made, that he did not require asset protection/personal protection cover…

‘…A cautious advisor was likely to have recorded such an instruction, being a significant departure from the advice, more fully than by the terms of the Authority to Proceed.’

The verdict

Judge Mansfield found in favour of the plaintiff, agreeing that Mr Moore had not acted according to his client’s instructions, thereby breaching his contract. Judge Mansfield also pointed out that the clients, Mr Ravesi and Ms Torres, clearly relied on Mr Moore’s expertise and were prepared to adopt his recommendations.

‘Having regard to the documentary and oral evidence and the way I have assessed it, I find that Mr Ravesi on 28 September 2006 did not instruct Mr Moore that he no longer wished to pursue the asset protection/personal protection elements of the policy recommended in his name and for his benefit…

‘On that basis, Mr Moore did not procure MLC to secure a policy for Mr Ravesi of the character which he sought. That was a failure to comply with instructions and a breach of contract…

Mr Moore should, acting reasonably and providing reasonable advice, have raised the wisdom of that instruction

‘…in my view it was incumbent upon Mr Moore to raise at the meeting on 28 September 2006 the fact that the change of instructions, as he understood it, was removing a significant level of cover which he had recommended in respect of the person whose ongoing well-being was of most importance to the welfare of Affinity and to the security of Mr Ravesi and to some extent Ms Torres. In my view, Mr Moore should, acting reasonably and providing reasonable advice, at that point, have raised the wisdom of that instruction and pointed out those matters.’

However, Judge Mansfield agreed with NAB and Mr Moore that Mr Ravesi was in part responsible for the error, because he failed to look carefully at the documentation sent by MLC in relation to the insurance cover.

‘It is the purpose of those letters, clearly, that the insured should look at them so as to be aware of the level of insurance cover which has been issued. Mr Ravesi, for whatever reason, clearly did not do so. I consider that that is a significant departure from the level of care which should be expected of an insured person looking after that person’s own interests.’

Judgement was for the plaintiff in the amount of $110,460, being a proportion of the $140,000 TPD benefit that Mr Ravesi would have received if his personal protection/asset protection cover had been put in place. The damages awarded were reduced by 40% due to Mr Ravesi’s own negligence, having failed to read the policy documentation provided by MLC.

Key takeouts

Question client actions

The Judge in this case found that it was reasonable to expect that an adviser acting in the same situation as Mr Ravesi would have questioned why Mr Moore decided to reduce his cover. Simply accepting that it was ‘the client’s decision’ was not, in the Judge’s mind, an appropriate course of action for an adviser to take.

As noted in this case, financial advice clients look to their financial adviser as an ‘expert’ in their field. Therefore, advisers should be cautious when dealing with clients who request a departure from the original advice recommendation, and be sure to document the reasons behind the client’s decision.

Keep detailed documentation

Much of the evidence relied upon in this case was the documentation prepared by Mr Moore during the advice process. In nearly all cases, this documentation was incomplete, or unclear. In passing judgement in this case, Judge Mansfield said there was no evidence to suggest the client had instructed the adviser to remove an element of the cover originally recommended. Had the adviser clearly documented this instruction, the client is unlikely to have been successful in their claim.

Importance of reviews

It is also worth noting that no annual review appointments appear to have occurred between Mr Moore and Mr Ravesi and Ms Torres. The pro forma document completed at the start of the advice process included a section indicating the client’s acknowledgment that the adviser had explained the need to review the insurance plan, and for that review to occur either annually, at another regular period, or as notified to the adviser. None of those alternatives were marked as selected on the document. Had a review meeting occurred in the intervening three year period, the gap in his cover is likely to have been identified prior to Mr Ravesi’s accident.

To view a copy of the Judge’s decision notes, click here.

Case Study – Advising Gen X and Y

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December 1, 2013

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This case study provides tips on how to engage with Gen X and Y clients. 2013 AFA Rising Star, Matt Hale, and his clients Jen and Glenn talk about the things that matter most to younger advice consumers.

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At a glance

Submitted by: Matt Hale
Age: 27
Business name: Rising Tide
Licensee: Apogee
Clients: Jen and Glenn
Age: Both 32

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In detail

After the birth of their first child, Jen and her husband Glenn knew they needed to take out insurance. The decision about who to approach for advice was an easy one, as Jen’s sister was already one of Matt’s clients.

As is common with members of Generations X and Y, Jen did her research before meeting with Matt. In Jen’s case, her research involved speaking with her sister, but for many potential Gen X and Y clients, the pre-meeting investigation will take place via the internet. Matt says the most important thing an adviser can do when meeting a prospective client is to be themselves: “People of our age are often quite forthright. They know who they work well with, and if you’re not true to yourself, they’re going to find out.”

Despite having received a stellar recommendation from her sister, Jen and Glenn were still sceptical about their first advice appointment. Jen had already entered the property market, and along with her mortgage the bank also encouraged her to take out insurance to protect the loan.

“They basically said, ‘Sign here and you’re covered’,” recalls Jen. “But I walked away thinking: ‘What on earth am I covered for? What happens if something goes wrong?’

“Part of wanting to see an adviser was a desire to become more knowledgeable about financial issues. I think that comes with being a first-time parent. I need all the information I can get, because any decision I make now also affects our son. I’m not going to sign-up for anything that I’m unsure of.”

Another consideration for Gen X and Y couples engaging a professional adviser is the challenge of finding time to book in the appointment. In Jen and Glenn’s case, their first meeting with Matt occurred with baby Lewis in tow.

“You have to be flexible,” Matt says, of dealing with Gen X/Y clients. “Sometimes we’re conducting meetings in the morning before work, or when the children are having their afternoon kip, or after they’ve gone to bed at night. We are more than happy for clients to bring their kids into the office, but if it suits them better we’ll go to their house or catch-up via Skype.”

I don’t want to be going to a doctor that I don’t like for 50 years

Jen recalls the feelings she shared with Glenn at the end of the first meeting with Matt: “Before we’d even reached the lift, Glenn said, ‘Geez, I feel so much more comfortable with this.’ He had never been through a process like this before, and I could tell he was a little bit anxious about it. He was concerned about how much money it would cost and how much time it would take out of his working day.

“But from the start, we felt extremely comfortable. We didn’t feel awkward about not knowing enough. We weren’t pressured to answer Matt’s questions right away, and we left with a whole lot more than we thought we were going to.”

In Matt’s case, the first appointment is what he calls the ‘right fit’ meeting. “I’ve got client relationships that could be going in 50 years’ time. I don’t want to be going to a doctor that I don’t like for 50 years, so why would you go to an adviser that you feel that way about? That first meeting is about working out whether I can add value, whether I want to work with the client, and whether they look like they’re comfortable with me.”

From then on, the focus for most Gen X/Y clients is to get their financial protection in place. “When a new baby is born, it’s 18 months to 2 years of just ‘battening down the hatches’,” says Matt. “It is the time when there’s going to be the least amount of family income coming in, because of maternity leave, days off work, and a whole raft of issues that come up with a young child in the house. We don’t want people to be feeling that there’s pressure on them to do anything other than look after the family.”

Jen’s advice to other financial advisers who are dealing with clients her age is simple: believe in what you do. “If Matt didn’t believe in what he was doing, that would show through so quickly to new clients, especially those with new families, who are questioning everything that is going on in their lives. It was Matt’s integrity that got the deal across the line, and what made us feel so comfortable when we walked away.”

Case Study – Social Advice

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December 1, 2013

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Igor and Sacha Loutkovsky have always approached advice a little differently, operating a business model that means they rarely ever meet their clients in person. In this case study, they share how new technology and the ‘social advice’ movement have enabled them to take their risk business to the next level.

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At a glance

Submitted by: Igor and Sasha Loutkovsky
Business name: Loufin Pty Ltd
Licensee: Aon
Years in advice: 30
Number of clients: 1800+

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In detail

For nearly 30 years, Igor Loutkovsky has been providing risk advice to clients he hasn’t met in person. His business model is based on bulk referrals, the majority of which are generated through strategic alliances with seminar providers. Igor presents at these client events, alongside other professionals such as accountants and lawyers, on the importance of insurance and wealth protection. After the event, clients who request assistance with their insurance needs are passed on to Igor and his team to follow up, and clients who wish to take out cover have their applications processed over the phone.

“The first batch of referrals I got was 250 potential new clients,” Igor recalls. “I had a stack of papers with all these prospects’ contact details on them. And it was the same after each seminar: I’d get all these contacts, from all around Australia, which I had to follow-up.”

As the leads continued to flow in, Igor’s daughter, Sacha, joined the business (about seven years ago). “The business started off well and, with Igor’s energy and planning, gained a lot of momentum very quickly,” says Sacha. “But it was very time consuming. A lot of leads were burnt because we just couldn’t get to them. Our follow-up process was very hit and miss.”

Ongoing client engagement was also an issue: “We ended up spending so much time servicing our clients that we didn’t have time to really engage with them.”

Igor and Sacha realised they needed to maximise the value from their referral sources, as well as engage more effectively with their clients, to avoid losing them to other providers who may have a presence in the clients’ local area operating a traditional, face-to-face business.

“That’s why social media and technology is now playing such an important part in our business,” says Sacha.

Looking around the industry, at what other advisers were doing in their practices, led Igor and Sacha to Baz Gardner’s ‘social advice’ model. Essentially, ‘social advice’ is about using digital communication, social media, technology and client psychology to exponentially improve the quality, efficiency and profitability of an advice business. For Igor and Sacha, employing this approach has meant they can touch a greater number of people, in a very personalised way, very quickly.

They started by revisiting their business model. “We have two advisers doing renewals, and servicing the existing book. This leaves Dad and I to concentrate on engagement and new business,” explains Sacha.

They also invested in updated Client Relationship Management (CRM) software, and linked this to an email marketing system. Now, when new leads are received, they are immediately entered into the client database. An automatic introduction email is then generated, which includes a link to an online pre-interview questionnaire, as well as to the company’s FSG, Facebook, Youtube and website links.

As well as saving the business time and money, this process has the added advantage of putting the next step back on the client. “Before we had this system, I had to contact each lead, sorting out the ‘tyre kickers’,” recalls Igor. “Now, we can see if they’re really interested by asking them to fill out the online form. And because we’ve saved so much time for the business, we can promise that if they do submit the form we’ll get in contact with them within 24 hours to discuss the next steps.”

The application follow-up process is also systemised, utilising the CRM database’s inbuilt task manager. “We can create reminders and tasks that need to be done in the future. So when you come in each morning you don’t have to worry about what you’re doing, because you have a systemised task list right in front of you,” says Igor.

The CRM database also features an integrated SMS process, so the practice can back-up its email messages with a text to the client.

“With bulk emails, you can never be 100% sure they will reach their intended target,” says Sacha. “They might end up as spam, or go to the wrong address because of a mis-spelled entry on the form. So a couple of hours after we send the email, the client will get a text message saying: ‘Hi, it’s Igor from Loufin. We’ve sent you an email. Please let me know if you haven’t received it.’”

Video plays a significant part in Loufin’s engagement strategy. Not only does it allow clients to ‘put a face to a name’, but it also provides the business with significant time savings.

“We started out by doing a simple Christmas greeting in 2012,” Sacha says. “It was so basic – just the team in funny hats, taken on a single camera in our office, with Dad wishing all our clients a ‘Merry Christmas’. We emailed that out to our client base, instead of sending Christmas cards, and we got a terrific response. So we followed it up with a Happy Birthday video, which is automatically emailed out on the client’s birthday.”

Sacha and Igor now use video to follow-up their initial discussions with clients, using a webcam to record a short wrap of what has been agreed with the client. This is sent via email to the client, along with any paperwork, or additional information that is required.

For clients who have questions about their cover, Loufin has engaged animated video specialist, Doodler, to produce six short educational videos, which explain the different types of cover in a simple, client friendly way.

“Instead of spending 20 minutes talking to them on the phone, explaining about the different types of cover, which I’ve found tends to go in one ear and out the other anyway, we now just send off a link to one of these videos,” says Igor.

It’s made us a very profitable business, because we don’t waste a lot of time

“The animations are so powerful that they could even be a source of referrals for us. Because when we send it to our clients, we say ‘Please feel free to forward this on to your friends’.”

Sacha agrees, saying the new, social approach has allowed the business to position itself, and the value it can deliver to clients, more effectively. “We are getting in contact and engaging with our clients; we’re opening up that dialogue. Since June, I’ve already had more of my own clients referring back to me. And while it’s difficult to pinpoint exactly what led them to do that, I checked their records and all of them had received the Christmas and Birthday video emails.”

This ‘customer centric’ thinking is also influencing the non-technological elements of Igor and Sacha’s business. In February this year, they rebranded the practice from Loutkovsky Insurance to Loufin. Why? Because no-one could pronounce Loutkovsky!

They similarly changed some of the language they use when speaking to customers. Igor gives the following example: “Previously, when we were going through the leads, we’d ask the prospect if they wanted a ‘fact find’. If they said ‘No’, we’d simply move to the next person on our list. But how is a person who’s never worked with a financial adviser going to know what a ‘fact find’ is? Now we say, ‘Let’s book in a chat to find out what’s important to you’.”

Despite having only operated under their new model for six months, Loufin is already seeing significant results.

Says Igor: “It’s made us a very profitable business, because we don’t waste a lot of time. We don’t have the same overheads that other advice offices may have. Some of my peers spend half an hour/45 minutes in Sydney traffic to go talk to someone for half an hour, and then another 45 minutes getting back to their office – in that time we could have engaged 25 clients.”

Sacha says the approach is also giving the practice credibility: “Social media, especially the use of the email marketing system, makes us look really professional. It gives us credibility straight off the bat, by saying: we know what we’re doing, we’re a professional outfit, and we’re really here to help you and provide value that others may not be able to. I don’t think we were coming across that way ten years ago.”

Both Igor and Sacha believe their business is now well placed to remain competitive over the next ten years, in the face of what they predict will be an increasingly competitive market.

“Things are changing,” says Sacha. “All you have to do is hop online and you can see what’s emerging, what new competitors are out there. Everyone’s converting to risk because it’s fairly lucrative in the landscape of financial products and it’s viewed as easy to write. Accountants are getting into it, financial planners have fallen back on risk because of the GFC and FoFA. And we’re getting hit by online businesses like iSelect, and the direct insurers. On top of that potential clients now have access to all the information they could ever want or need about insurance online, so you have to be able to provide value that they can’t get themselves.

“Within three years it’s going to be really tough. There’s enough business to go around in Australia – we always see those stats about underinsurance – but it’s not going to be as easy as it was. If people don’t prepare by taking on whatever they need to upgrade and streamline their business, and in most cases it is social media and technology, they’re going to get pushed out.”

Case Study – Mentoring

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December 1, 2013

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A shared interest in social media and technology led James Sutherland and Meike Suggars to embark on a mentoring relationship. Three years on, having both experienced significant growth in their personal and professional development, they share what they believe is the key to making a mentoring relationship work…

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At a glance

Mentor: James Sutherland, AFA member
Business name: myonlineadvisers
Licensee: Own AFSL
Years in advice: 15 years
Location: Brisbane

Mentee: Meike Suggars, AFA member
Business name: Suggars & Associates
Licensee: Synchron
Years in advice: 3.5 years
Location: Melbourne

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In detail

Suggars and Sutherland met at an Association of Financial Advisers (AFA) Conference three years ago and immediately connected. After chatting about all things social media, and having realised they could learn from one another’s experiences, they agreed to set up a regular, monthly catch-up.

“Our conversations generally involve bouncing ideas off one-another, and talking through challenges or opportunities within each of our businesses,” says Sutherland.

Suggars also appreciates having someone outside her own business to keep her accountable: “Even if you do have access to a colleague with great industry experience within your own business, the challenge of being accountable to someone outside the practice can sometimes have more impact, and be a bit more motivating.”

“I find talking through processes and techniques with another person reminds me of the things I need to be doing in my own business,” says Sutherland. “For example, we (established advisers) get caught up in the business of compliance, and focusing on getting signatures on pieces of paper. Who reminds us about simple things like open-ended questions, having a pipeline, and avoiding fear phrases? Teaching another adviser about these techniques helps me hone my own skills.”

the challenge of being accountable to someone outside the practice can sometimes have more impact

Suggars has also recently taken on the role of mentor, working with 2013 AFA Rising Star of the Year Award Finalist, Kylie George (Harvest Wealth). Like Sutherland, Suggars says she also benefited from passing on her skills to another adviser:

“Talking things through with Kylie actually helped me realise how much I’d learnt in the couple of years that I’d been advising. It also helped me recognise areas in my own business on which I wanted to focus more time and effort.”

Defining your goals and objectives up front is very important, says Sutherland. “This can be as simple as asking your mentee about what’s important to them, what they want to achieve in a month, six months, or a year from now, where they see their gaps and where they think you can help them.”

He also believes setting a regular appointment time, or agreeing how frequently catch-ups will occur, helps to keep the relationship going, especially in the early stages.

Most importantly, says Sutherland, don’t feel like you have to force a relationship. He uses the example of a referral relationship he once had with a mortgage broker to explain:

“He (the mortgage broker) didn’t like using email to communicate. He preferred faxes and said it was because his clients preferred it, too. It was really frustrating for me, because he was just not interested in technology or finding a new way of doing business. So even though I was getting a good number of referrals from him, I had to end the relationship. I think the same goes in a mentor relationship. If you’re not getting what you need, remember that there are lots of other talented advisers out there from whom you can learn.”

Suggars is also keen to stress the importance of a strong connection:

“A mentoring relationship is not going to work if you don’t like each other. Yes, you want someone who has been successful in their career, and yes, you want someone who you find inspiring and motivating. But if you don’t like them it’s not going to work. Because a mentoring relationship is still a relationship, it needs to have that foundation of compatibility. You have to have that personal connection.

“If, after the first couple of times you’ve met, you find you’re not looking forward to speaking to someone, or you don’t smile when they ring, it might be worth reconsidering that relationship and perhaps looking for someone else.”

Case Study – Building a New Risk Advice Practice

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September 1, 2013

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In this practice development case study, new risk specialist adviser, Tatiana Coulter, shares how she started her practice from scratch. She talks about the marketing and lead generation strategies she employed to grow her client base, and offers tips for other advisers starting out in their own businesses.

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At a glance

Submitted by: Tatiana Coulter (Tats)
Business name: Monarch Advisory Group
Licensee: Securitor
No. staff: 1
Average premium per client: $7,000

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In detail

Getting started

One of the first recommendations Tats received, from friend and Financial Planning Association CEO, Mark Rantall, was to develop a ‘white paper’ on how her advice business could look. In writing the paper, she talked to other advisers to get an understanding of their business models and advice processes, and did significant research into the type of licensee that would fit best with her goals.

The planning process took nearly 20 months. During that time, Tats signed-up with licensee Securitor, designed a brand, produced marketing materials and, most importantly, organised finance for the business.

“Having the finance in place before you start is really important,” she says. “It means you’re not anxiously waiting for your first client to sign-up just so you can pay your bills. In the first few weeks I would have appointments where I could tell the person wasn’t ready to sign-up. Having the finance in place meant I didn’t have to rush them through the advice process, and could spend the time on the education side of things. You want to get clients across the line, but you also don’t want to come across as too pushy.”

Establishing a Board of Advice

During the initial planning phase, Tats engaged a number of industry peers, seeking their advice on her business model, and how to go about attracting clients.

“I didn’t really think of it initially as a Board of Advice (BoA). I thought I would launch my concepts to my friends and peers as a way of letting them know what I was doing, and get their input on branding, etc.”

There are now seven BoA members, who meet every six months to discuss the business and how Tats is tracking against her plans.

“They keep me accountable. We talk about how the business is evolving, how I’ve been tracking against the initiatives we discussed six months earlier, and then we run through the business development ideas that I’m going to implement over the next six months.

“There have been times when I’ve put forward an idea and the BoA has advised against it. I may not give up on the idea straight away, but if there are red flags, I know I need to do some more research.”

Repositioning for growth

Five months after establishing the business, and having attracted mostly friends as clients, Tats decided to reposition her business.

“In all honesty, I probably went about it a little bit the wrong way at the start, because I was really focused on building an ‘insurance only’ business. But I was losing out on potential clients, who said they were looking for someone to help them out with everything, not just their insurances.

“I decided to reposition myself as a holistic financial planner, with a specialisation in insurance.”

Tatiana also moved into an office with two mortgage brokers, who have subsequently become a significant source of referrals.

“Having a successful referral partnership really comes down to trust. I had worked with one of the brokers in a previous role, so we knew about each other’s work ethic and the way we were with clients. We both knew there was no risk in partnering. And now that we share office space, the introductions can be really seamless.”

Referrals are also flowing from the local chapter of Business Networking International (BNI). According to its website, BNI provides a structured system of giving and receiving business through the establishment of a ‘formal’ relationship with dozens of other qualified business professionals.

“There are 34 in the group at the moment. There’s an accountant, lawyers, but there’s also a builder, a dentist, a florist, a hairdresser – it’s so broad.

“We meet weekly, and everyone has a job they need to do for each meeting. It is time consuming, but the formula works. My last five clients have come through that channel.”

Generating leads through marketing

“If everyone’s going right, I want to go left,” says Tats of her approach to marketing. For example, Monarch Advisory Group sponsors one of the players in the newly-formed Greater Western Sydney (GWS) AFL club, the Giants. When the player is introduced onto the field, or if they score a goal, the Monarch logo appears on the big screen at the ground.

“Because they’re an up and coming team the club really values the sponsorship and support. They’re really proactive; I’ve got direct access to the players and CEO, Dave Matthews. I’ve even met Kevin Sheedy (the coach) a couple of times. They’re not too big for their boots. They really appreciate you.”

Tats also joined the prestigious GWS Members ‘Captains Club’, which is aimed at attracting high-net worth individuals to support the club.

If everyone’s going right, I want to go left

“The tipping point for joining was actually that there were no other females in the Club. Because you’re the first female, they tend to promote you a bit, as well. They say: ‘You’ve got to help Tats. She’s just started her business and she’s the first female Captain’s Club member. She’s supporting us, so why not get behind her as well’.”

To communicate regularly with her clients, Tats uses social media.

“It’s doing exactly what we set out to do, which was showcase my personality. When I started the business, I was worried that I may have to change, to become really serious and technically-focused. But one of my friends pointed out that people who seek out a professional service buy the person. So if people don’t ‘buy me’, they’re not going to want to be clients. That was probably the best advice I received. People can Google the technical stuff; I focus on sharing anecdotes and real stories, because my clients can relate to them.”

Ongoing support

Tats attributes much of her success to the support of other financial planners.

“Through Securitor I have met some other advisers, all older gentlemen, and they’ve just been fantastic. They offer as much help and support as you could want. I’ve sat with them for hours, talking about issues and challenges that I’m struggling with in my business. I also have two planners who I met when I was a BDM, who I know I can call any time for their support or advice.

“My recommendation to others wanting to start up their own business is to begin talking to people as early as possible. Not only will they have ideas and advice for you, but it also means they’re already thinking about whether they have any leads they can send your way, well ahead of your first day of business.

“On day one, you need to focus. You don’t want to be worried about your website, your business cards or setting up your office. Set yourself up first, so you can focus on getting the clients in the door from day one.”

Case Study – Powerful Client Letter

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June 1, 2013

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This letter was sent to the adviser by the mother of a 27 year old man, diagnosed with cancer. It demonstrates the value that advisers deliver every day to individuals faced with genuine hardship. As the adviser points out, successful client relationships and client outcomes are at the centre of what advisers do, and technical expertise, qualifications, experience, interpersonal skills and a commitment to help clients are all equally important to achieve these outcomes. We thank Michael and his clients for letting us reproduce this letter.

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At a glance

Submitted by: Michael Nowak
Business name: Joe Nowak Financial Services Group
Licensee: AIW Dealer Services
Claimant: Brad Smith, male, diagnosed with cancer
Claim type: TPD through superannuation

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In detail

Dear Michael,

Colin and I want to thank you. We are so thrilled that we have had success for Brad in his TPD claims with his two super funds. It is all due to your hard work. It has been so very kind and generous of you to give Brad your time and professional expertise in dealing with claims of disability. For you to do it pro bono, as a service to Brad, was heartening to us. It is almost exactly a year since his diagnosis, and there is no way, with all the worry and radiation and trips to specialists here and in Sydney, that we would have had the energy or heart for a different struggle with insurance companies. Now we see why Tom recommended you and continues to have you as his insurance rep, even though he now lives on the other side of the country.

Today, Brad looked at the bulky files of papers, reports, emails, etc. that we have built up dealing with these claims, and said we couldn’t have dealt with it on our own. True. Brad has said this money will change his life. I hope so, if it helps to build his sense of hope and ease or gives him some fun, we will be relieved. He just turned 27, and hopefully he can use the money for a little travel with his girlfriend, and some to put aside in case he needs it later.

we couldn’t have dealt with it on our own

I am grateful for your quite, calm and patient manner and am sure this has worked in our favour with the insurance companies. If I had had to deal with them I would have found speaking about Brad and his illness too personal and difficult. I was touched at how much you were cheered by any small bit of better news we had. Your secretary too was caring and always professional and never made me feel a nuisance when I phoned or emailed on small matters. The fact that you returned our phone calls and emails when you were on family holidays and business trips showed me it was more than a job to you.

I know you have put in countless hours for Brad, and you made us feel we were important clients. Dealing with busy, crowded hospitals and overworked doctors we have not always felt important. Being seriously ill is constantly waiting, being humble, and a lot of bad news. So now, after all your hard work, Brad has had some good news and it has lifted his spirits and that is half the battle! Thanks again.

Sincerely,

Alison Smith

Case Study – Smoking Status

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June 1, 2013

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In this claims case study, the adviser shares the difficulties he encountered when lodging a claim for a client who had quit smoking prior to taking out his policy. The case study emphasises the importance of disclosure and definitions, and more significantly, the vital role a proactive and passionate adviser plays from contract to claim.

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At a glance

Submitted by: Adrian McDonald
Business name: Advice & Information
Licensee: Professional Investment Services
Claimant: Male, white-collar, diagnosed with cardiomyopathy
Claim type: Trauma and TPD

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In detail

Adrian McDonald’s client was a 47 year old project manager with the City Council, with a wife and two daughters, aged nine and five. He was in a senior role with all the commitments and stress such a job entails.

“Over a few visits, I presented the explanations of Life, TPD, critical illness and income protection insurance,” McDonald recalls. “By the final visit, explaining about having part of it structured through Superannuation for cash flow purposes, he didn’t baulk at any of them. He said: ‘I want the lot’. I remember him tapping the paperwork and saying ‘I trust you, Adrian’. He wanted security for his family.”

As McDonald explains: “He was a former colleague of mine some years ago, working in education. A very nice man and we always got on well. I approached him to see if his insurance needs were up to date, since he had left an employer of 17 years and thus lost his income protection and other benefits – sick leave, long service and entitlements.”

He signed up in September 2008 and in November 2010, he was diagnosed with a heart condition known as Cardiomyopathy – a deterioration of the heart muscle, often leading to heart failure.

“For a trauma payout, Cardiomyopathy requires you to qualify under the definition Class 3, which according to the insurer entails ‘… a condition of impaired ventricular function resulting in permanent physical impairment to the degree of at least Class 3 on New York Heart Association classification on of cardiac impairment’.

“My client only had Class 2, intermittent Class 3, so he missed out on a payment of $200,000 for critical illness, but fortunately, he did qualify for a $1.7m payment for TPD Own Occupation.”

I assure clients they will never need to deal with companies or call a 1800 number

But while the claim was eventually paid out, the process proved to be less than smooth sailing, emphasising the importance of disclosure and definitions, and more significantly, the vital role a proactive and passionate adviser plays from contract to claim.

A technicality held up the process. “The question was whether he was a smoker. He had previously smoked, many years ago, but he hadn’t smoked for years,” explains McDonald. “His doctor’s notes stated he was a ‘lifetime smoker’.”

That created issues with payment and some protracted debate between the insurer and the adviser.

McDonald flew to the insurer’s Head Office to clarify the matter with the Claims Manager, and to prove his client was indeed a non-smoker.

“It took a lot of behind the scenes work,” McDonald recalls. “I explained that I had known this client since 2003 and had never seen him smoke, or even spied an ashtray in his home. But they took the doctor’s report over my word. So, I asked the insurer to clarify with the doctor the client’s smoking status at the time of application. The doctor told the insurer he was a non-smoker for at least a year prior to filling out the forms.”

The policy had a 12 month non-smoking rate, referring to the 12 month period a person can consider themselves a non-smoker prior to the date of signing the application.

This highlights the importance of disclosure – “the warts and all approach” as Adrian refers to it.

“The onus was then on the insurer to prove he was a smoker within that 12 month period of signing the application.

“Disclosure is important, so that at the time of claim, there are no nasty surprises. The insurer goes through the client’s medical records and pharmaceutical benefits scheme records to cross check everything, to look for non-disclosure. They are in the business of paying legitimate claims, not fraudulent claims. That applies to every aspect of the paperwork about travel, health, hobbies, existing illness, family history, etc.”

The benefit of $1.7m was paid out in its entirety, where under the smoking clause the client would have only been entitled to half that amount.

“That’s a major part of my job,” says Adrian. “I complete all the forms with the client, but talking with insurance companies is solely up to me. I assure clients they will never need to deal with companies or call a 1800 number. When I do the claim, I go in to bat, boots and all, for the client and I know every aspect of their life and lifestyle – their medical history, everything.”

In this instance, Adrian’s client was very pleased. The payout took care of many financial burdens for the family, as well as covering medication and care for his condition, and putting his mind at ease over his family’s long-term security.

In a letter to his adviser, the client wrote:

“Adrian was always in close contact with me, keeping me in the loop every step of the way. As a family we were grateful to Adrian for his advice on personal income protection insurance. Little did we know we would need to make a claim within a few years.

“We cannot thank Adrian enough for his foresight in ensuring we were fully covered and for the way he handled our claims.

“Adrian has proven time and again that he is there for his clients and nothing is too much trouble. Both his initial and ongoing advice, as well as his support have been outstanding.”