riskinfo » Case Studies

Case Study – Interpreting the Policy Intent (Example 1)

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March 1, 2011

In this claims case study, the adviser was able to negotiate an overturn of the insurer’s original decision to decline the claim by looking closely at the original intent of the policy, as well as its literal wording. It demonstrates the importance of building strong relationships between advisers, dealer group management and claims managers.

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At a glance

Submitted by: Tony Lye
Company: Aon Financial Planning & Protection
Claimant: Male, blue-collar worker
Claim type: Income protection

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In detail

A builder injured his rotator cuff in a work accident. The rotator cuff is made up of a group of muscles that help move and stabilize the shoulder joint. Damage to any one of the muscles or their ligaments that attach the muscle to bone can cause significant pain and disability.

Treatment for the injury involved cortisone injections into the shoulder. While the builder was having treatment he was able to go to work and chose to do so. But after six months the shoulder was no better. The builder had an operation to repair the shoulder and took time off work. It was only after he had the operation that he submitted an income protection claim.

Because of the six-month time delay between the accident and the claim being initiated, the insurer classed it as ‘sickness’, and the claim was rejected.

The Chief Claims Manager agreed with the argument regarding the intent of the insurance policy

However, Aon, through its client advocacy process, approached the insurer to discuss the claim in terms of the intent of the policy; its moral and ethical intent. The Chief Claims Manager agreed with the argument regarding the intent of the insurance policy and agreed to pay the income protection benefits claimed.

There are more detailed elements involved in this case than the brief summary above, where the insurer could have presented a valid case for denying the claim by applying a literal interpretation of the policy wordings. Both Mr Lye and Managing Director of Aon Hewitt Wealth Management, Pierre Kraft, have given credit to the insurer for their goodwill in reassessing this and other denied claims in the spirit in which the original policy was intended to protect the client in their time of need.

For another example of how Aon’s client advocacy process worked in favour of a claimant, see also: Interpreting the Policy Intent (Example 2).

Case Study – Interpreting the Policy Intent (Example 2)

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March 1, 2011

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In this claims case study, the claimant was denied a TPD payment as her specialist did not believe she would be unable to work again. The dealer group was able to negotiate an overturn of the insurer’s original decision to decline the claim by contacting an alternative medical specialist. It demonstrates the importance of building strong relationships between advisers, dealer group management and claims managers.

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At a glance

Submitted by: Tony Lye
Company: Aon Financial Planning & Protection
Claimant: Female, diagnosed with lupus
Claim type: TPD

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In detail

The client contracted the autoimmune disease of lupus. This disease has the effect of attacking healthy cells and structures in the body, which can cause inflammation, damage and pain. Despite years of research, the cause of lupus is still unknown.

While the client’s local GP said she should not work again, a specialist in the field was not prepared to state that the client was unlikely ever to be able to work again. Her TPD claim was dismissed.

Aon approached the insurer and all parties agreed to abide by the decision from another specialist who was asked to provide a further opinion on the client’s case.

the impact on the client and her family of the decision to accept the claim was life changing

As the client’s bank was in the process of foreclosing on her home for her inability to repay her mortgage, the specialist returned with an opinion that, given her condition, the client was indeed unlikely ever to return to work. Based on this further opinion, the insurer reversed its decision and admitted the claim.

According to Mr Lye, the impact on the client and her family of the decision to accept the claim was life changing: “She received $1.7m which settled her mortgage and secured the financial future for herself and her three young children. The client advocacy program turned around the lives of a family that one day was going to lose their home, had no income and a bleak future, to a family with no debt and over $1m in the bank,” said Mr Lye.

There are more detailed elements involved in this case than the brief summary above, where the insurer could have presented a valid case for denying the claim by applying a literal interpretation of the policy wordings. Both Mr Lye and Managing Director of Aon Hewitt Wealth Management, Pierre Kraft, have given credit to the insurer for their goodwill in reassessing this and other denied claims in the spirit in which the original policy was intended to protect the client in their time of need.

For another example of how Aon’s client advocacy process worked in favour of a claimant, see also: Interpreting the Policy Intent (Example 1).

Case Study – Adviser Comes to Rescue of Breast Cancer Sufferer

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November 1, 2010

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This case study details the pro bono work of Western Australian adviser, Rebecca Newton, who won the pro bono category Award in Financial Wisdom’s 2010 Value of Advice Awards. It highlights how advisers can add value during the claims process and how claims impact the family of the claimant, as well as the life insured.

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At a glance

Provided by: Financial Wisdom
Adviser: Rebecca Newton
Business: Prestige Wealth Partners
Clients: Husband and wife with three children, wife diagnosed with breast cancer
Claim: Trauma

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In detail

When Richard and Stephanie White* first contacted Rebecca Newton of Prestige Wealth Partners Pty Ltd** (WA), things had really hit rock bottom. On top of two serious illnesses, the couple and their three children had lost their only source of income and were facing a bleak and uncertain future.

Stephanie had been diagnosed with breast cancer which she was continuing to battle. Richard, a self employed carpenter, had to take time off work to take Stephanie to her hospital appointments.

With less time available for work, he lost his contract with the builder who was his main source of employment.

At this stage, Stephanie and Richard began to struggle with paying the mortgage, car loan and bills. Even putting food on the table for the family was becoming difficult.

With Stephanie’s deteriorating health and now no income, Richard sank into depression.

He had also been halfway through building the house they were living in, but with no money to buy supplies this had to be put on hold. As a result they were living in an incomplete house, adding further to their already stressful situation.

In desperation, they contacted a number of financial advisers to see if anyone would be willing to donate their time and knowledge to help them, but all said no. Then they saw an ad for Prestige Wealth Partners in the local paper and decided to contact Rebecca.

At first, Rebecca was unsure of whether she could help them or not, but decided to meet them and hear their story. “I drove out one night to their house in country WA,” Rebecca said, “because until you meet someone face to face and understand their whole situation, it’s hard to know whether you can help them or not.”

until you meet someone face to face and understand their whole situation, it’s hard to know whether you can help them or not

Once she became aware of the dire situation they were in, she decided to do whatever she could to help. “It was very clear that they didn’t have any funds to pay for my advice, but their financial position had become so stressful that it was affecting Stephanie’s recovery and had led to depression for Richard. So I agreed to work with them on a pro bono basis.”

During their initial fact find session, Rebecca asked Richard and Stephanie if they had any life insurance policies. “Stephanie told me she had death cover with a major retail insurance company, so I asked for a copy of the policy schedule. In reading the schedule, I noticed a trauma benefit as a rider to the death cover that they weren’t aware of. I discussed what this meant, without getting their hopes up.”

After looking into the terms of the trauma policy, Rebecca realised that a trauma claim could be made that could help them with their financial woes.

“Stephanie and Richard didn’t know that they could claim under this policy and had been struggling for about 12 months before I came along. When I told them they could claim, they didn’t even know where to start.”

They needed direction, support and guidance which Rebecca was able to provide in spades. “Because they were so absorbed in Stephanie’s recovery, it was important that I was able to relieve the pressure from them of having to worry about paperwork, following things up and making sure everything was in place.”

Rebecca did all the time-consuming paperwork for them, helped the couple fill out all the forms and scanned the files through to the insurance company. However, they hit a roadblock when Stephanie’s doctor delayed excessively in providing a Specialist Report which was needed for the claim.

“After six weeks, the situation was getting critical for Richard and Stephanie if they were to keep their home,” Rebecca explained. “As a last resort, they dropped Stephanie’s hospital file in to me in case any of the other reports would help.

“I rang the head of claims at the insurance company, explained the problem and asked if there was anything else we could do. He made the decision that as Stephanie had been a long standing client of theirs we could go through the medical file over the phone, to see if there was anything else in the file that could be used instead of the specialist report.”

After four long hours on the phone going through the file, he was eventually satisfied with the quality of the other evidence of Stephanie’s condition to waive the report.

On 23 February 2010, Rebecca received the cheque in the post for Stephanie’s claim. “I rang them immediately to make an appointment for me to come and see them, and the next morning I hand delivered the cheque to them. To be able to relieve this financial pressure from them was just so rewarding, and the look on their faces was priceless!”

To be able to relieve this financial pressure from them was just so rewarding, and the look on their faces was priceless!

Thanks to the payout from the claim, Stephanie, Richard and their children are now in a better position, both financially and in their lives in general.

With the financial pressure off them they were able to concentrate on improving their health. Stephanie has recovered from her breast cancer and she has started a business as a driving instructor. They’ve got some money in the bank and have managed to catch up on all their bills. Richard is no longer on antidepression medication and his health has improved significantly.

They see Rebecca quite regularly now; Richard now has insurance on himself and they’re starting to look at investments. They have also been able to do some work on the house, creating a more stable environment for their children.

“When I first met them they were living in a house that wasn’t complete – now each time I see them there are new improvements to the house. They finished the games room for the children, whereas before there wasn’t even a roof on it.

“Overall, this experience is one of the reasons I’m a financial planner. Providing good financial advice can have a huge impact on people’s lives and especially in Richard and Stephanie’s case, it can really help to relieve financial stress when it’s not required.”

* Names have been changed to protect the clients’ privacy.

** Prestige Wealth Partners Pty Ltd is an Authorised Representative of Financial Wisdom

Important Information: This case study has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFS Licence number 231138 (Financial Wisdom), who is the provider of general and personal financial product advice services. Financial Wisdom is a wholly owned, but non-guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. Information in this case study is based on its understanding of current regulatory requirements and laws as at 15 September 2010 and may be subject to change. Financial Wisdom advisers are representatives of Financial Wisdom Limited. This case study is for illustrative purposes only. Individual circumstances may vary and this will alter the outcome. Not all life Insurance policies contain trauma benefits or riders. This case study may include general advice but does not take into account your individual objectives, financial situation or needs. When considering a financial product you should read the relevant Product Disclosure Statement (PDS) available from the product issuer carefully and assess whether the information in this case study is appropriate for you. You should consider talking to a financial adviser before making a financial decision. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. Copyright © 2010 all rights reserved Financial Wisdom Limited ABN 70 006 646 108.

Insurance How To – Insurance Applications and Client Birthdays

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November 1, 2010

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In this Insurance How To, DKN Financial Group’s resident risk expert, Peter Stathis, outlines a new business case study that highlights the issues that may occur when a client celebrates a birthday during the underwriting process. It highlights the importance of considering all issues that may arise during an application process and how to manage clients’ expectations.

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At a glance

Provided by: Peter Stathis
Business: DKN Financial Group

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In detail

Apart from good emotional and relationship skills, three traits stand out as must haves for advisers who write life risk policies for their clients:

Patience – lots of it
Persistence – lots of it
Managing client expectations – especially during the application process

With the last point in mind, I thought it wise to mention birthdays in light of a case that occurred for an adviser in our group. Birthdays can have a habit of coming around just before that hard fought insurance application is completed, i.e. before the life office has issued the policy document.

When a birthday does roll around during the application process, the premium applicable to the applicant’s new “age at next birthday” will apply and be more expensive.

In this case, an insurance application was returned to the adviser three weeks prior to the client’s next birthday. No one can be expected to remember all client birthdays but this case illustrated how a quick check of the applicant’s birth date would have saved a great deal of consternation for all.

contact the insurer to ask what options they offer in the event that the ultimate policy is issued after the client’s next birthday.

As the pending birthday was not noticed prior to submission, the client’s expectations could not be properly managed for the inevitable outcome when the insurance company ultimately approved the cover over six weeks later.

For a large case of over $2 million, the time taken to approve the policy was not unusual. For larger cases, the underwriting process is lengthened because medical evidence such as doctor’s reports or blood tests is sought.

Given this, it’s wise to manage client expectations carefully from the time they return their signed application so that they know what’s ahead. In this case, the client’s slowness in returning calls left by the mobile pathology service contributed considerably to the delay.

Applications not managed with this in mind can deliver unwanted surprises for the client and the adviser at a time they’d rather not be reminded they are a year older! Some life offices are prepared to backdate the start of a policy to the day before the applicant’s latest birthday – providing it was not more than 30 days before. However, this is not a given and indeed for those life companies that do offer backdating, often they will only do so if the full annual premium is paid – not an option for many clients.

With this in mind, for any insurance applications you are working on now that with the passage of time may find themselves in this basket, contact the insurer to ask what options they offer in the event that the ultimate policy is issued after the client’s next birthday. Let your client know about the possible outcomes and the costs. That way they won’t delay their actions and will present themselves for medicals quickly. In some cases the approach of a birthday may hasten your “close” of the client.

For really time critical applications, once submitted it pays to follow the passage of medical reports as they pass from the pathology lab to the life office underwriting department. Life company websites track the application throughout the underwriting process, so don’t hesitate to pick up the phone if things don’t appear to be progressing as they should.