- Yes (64%)
- No (31%)
- Not sure (5%)
Taking inspiration from the risk store’s Sue Laing, and mindful of recent events, we’re asking you the same question we did seven years ago, namely whether you think there’s a case for standardising trauma insurance definitions.
As you consider this question, click through to our article from this week in which Laing renews her call for the industry to consider this path (see: Industry Expert Renews Call…).
Meanwhile, the risk store founder, who boasts an extensive life industry pedigree, considers and addresses three critical issue in relation to this question, drawing on the UK experience:
…the [UK] insurers’ association suggested a minimum rather than actual standardisation
- The industry position that “There is no need for standardising definitions as the definitions are so close now.” Laing’s response: “If they are so close, take that tiny step further and align them to a minimum and remove any doubts for advisers and consumers.”
- The ‘nay-sayers’: ‘This would remove our competitive advantage.’ Laing: “…the [UK] insurers’ association appreciated the concerns from a marketing point of view and suggested a minimum rather than actual standardisation.
- ‘Who is going to choose the wording we are meant to agree with?’ Laing: “One of the strengths of the UK outcome was that they engaged the experts for a change and went outside the industry… Here, we would emulate that by utilising the expertise of the Heart Foundation and the Stroke Foundation, the Cancer Council, the MS Society etc
While we’re simplifying what is and will always be, a complex issue, the gauntlet has nonetheless been thrown. Do you wish to pick it up and run with it? Tell us what you think, and next week, we’ll report your feedback and how that compares to the same question we asked you seven years ago…
Sue Laing is also asking the same question on the risk store’s website, where the challenge is: As an industry professional, do you support there is a basis for developing minimum standard definitions of the key trauma events in the Australian market?
While the idea of standardising Trauma definitions sounds great for consumers, I have to agree that it prevents competition between insurers.
CommInsure (and MLC) are 5 years behind the times with their insurance product offering and as such, in my opinion, deserve everything they’re copping at the moment and advisers who recommend them, probably more so. Why would you recommend a 2001 Holden Commodore when a 2015 BMW is available for less money??? Two reasons only I would have thought – conflicted remuneration or limited product list.
I’m yet to be sold on standardised definitions personally and believe its up to advisers to do their research for their clients to make sure their clients have the best cover available. $50,000 of high quality Trauma Cover that pays is better than $100,000 of low quality Trauma Cover that won’t pay in my mind. I haven’t had a Trauma Cover claim denied yet either.
It is not only the two insurers that you Concerned Risk Specialist mention, that have “behind the times” definitions. Practically every insurer has older series products on their books that do not benefit from auto-upgrades. Often this may be due to a change in reinsuer or pricing. On the flip side, some of the definitions on these old policies are however better than current definitions available. We know that the two major claims are heart system & cancer, when making recommendations should we mostly consider only those two ailments?
I would like to see minimum standard definitions for key events introduced as a safety net which was decided by the heart foundation and cancer council etc, but beyond that competitive advantage should be allowed. Perhaps the heart foundation could actually put it’s heart foundation tick to good use and give insurers the tick who they feel are offering fair terms. This would also has the potential to assist with improving public perception.
Katherine yes there is no question that the discussion is only about minimum standards as the outcomes in the UK confirm was the right decision. Go to town on value-adds after that. And in additional, related response to the below comment there would not even be a 2001 model available as it wouldn’t meet the minimum. How much better for advisers to not have to ‘defend’ a 2001 model as is happening as we speak, but to be able to reassure a client in that early period of doubt and confusion during the advice process, that they can’t go more wrong with one definition than another, but that the insurer chosen has been chosen because they have a fabulous ‘drive-through’ process for trauma claims that others don’t have, for example. If they will all pay on a minimum standard definition, can’t they then devote themselves to SERVICE that is clearly lacking in some quarters
But Sue – who decides when improvements or updates are made to Trauma policies in the future, after this standardisation first occurs? Does the industry have to collectively get together every time a new medical definition comes out or would it be simply handed down to each insurance company by some ‘industry body’ that may already exist (or not yet exist)?
With regards to my analogy below, I’m referring more to advisers who in the past have recommended CommInsure or MLC when several higher quality, more extensive policies were more than likely available to them at less expensive rates.
The UK embedded a collective committee-based (as per the original) review process every 3 years and it’s been working ever since. The latest version is December 2014 and can be found on the ABI website. Of course it isn’t a one-off exercise!
Thanks for your reply Sue – what a busy day you seem to be having! So many angry and frustrated advisers who like me, are genuinely concerned about the future of advisers in the industry.
Standardisation would remove many of the issues in the industry. Advisers are generally not medical experts and for an adviser to categorically state that one definition is better than another is fraught with danger. Standardisation would also be another reason why churning would be decreased. Everyone would know where they stand when it comes to a claim and reduce the negative perceptions of the industry caused by the likes of the recent Commminsure issues.
Absolutely, standardise definitions. The only way that we as advisers can determine whether we have recommended the correct Trauma policy for a client is at claim time, and whether the policy definition for that specific event matches the severity of the Trauma suffered by the client. That is a very dangerous path we walk.
Yes, and partial benefits! ..Then it simply comes down to how many conditions each policy covers and all the other options such as reinstatement, buy back etc. .. Too easy .. I have never fathomed why the providers have made things so complicated just to get an edge? It has always made it potentially difficult for the adviser and more importantly, very dangerous for the insured!
As a side comment, I had reason to claim for myself on two different provider’s policies in Nov last year for heart valve repair and the definitions and types of procedure paid out on, or not, were somewhat different and initially caused me some stress even though I was the insured AND the adviser – Happily both paid my claims!
I support some kind of standardisation. I don’t know anyone in the industry, perhaps outside of CMO’s, who can pick up two PDS’ and compare them well enough to truly say which product has ‘better’ definitions.
On a slight tangent: unfortunately the rating houses fill the gap and their rating encourages adding feature after feature that ultimately costs every policyholder more money. Eg, add a more liberal heart attack definition and ratings go up: claims costs follow and so do premiums (eventually). The extra premium that everyone pays is supporting claim payments to people getting a “heart attack” who, in reality, are much more likely to be back to work very quickly having suffered no loss. Think of part of the premium being, effectively, for a lottery ticket. For the company following this route, sales go up, everyone is happy.
But for the life company who sticks to guns to maintain a more strict heart attack definition because they believe it is fairer to all end consumers in the long run, get hammered.
I know we need competitive pressure, but I struggle to see where the balance of best interests is weighed up. Certainly not by the rating house ratings.
Hi JM, have read many of your posts before and respect your views as a contributor to the notion of a “Sustainable” insurance industry. Although I believe the use of “ratings houses/research providers” should not be the “be all and all all” of providing product advice I can say with some confidence that when I see a “c” rating Heart Attack Vs an “a” rating I am reasonably confident that the “a” rating is better than the “c” (I’m no cardiologist mind you but the methodology I see seems quite logical to give the ratings..well the provider I use anyway). Perhaps this is where the industry “standardising” could come from. Challenge the research houses and perhaps with collaboration from CMO’s a standard set of “a,b,c,d” definitions can be implemented and priced accordingly?
JM your comment hits yet another nail on the head. Without minimum standard definitions, you can write the ‘best’ product one month and the next month the ratings come out with someone else’s new, ‘better’ one – what are you supposed to do? You CANNOT give your clients the ‘best’ all the time – it’s impossible and inconceivable to expect this. So: minimum standard means you don’t have to represent that what you have given the client is the ‘best now but hey by the way it may not be next month’. This is a ludicrous situation that has been perpetuated for far too long.
Hi Sue could not agree more and yet we have a Best Interest Duty that should our client come to us and say “please review my policy…I would like to ensure that it remains competitively priced and is of high quality” (in terms of policy definitions..ie ability to claim). If I go to market and can source a clearly better or even identical policy for cheaper…what am I to do? If I recommend a change I am labelled a “churner”. If I recommend they stay, I am at risk being sued down the track when a claim is denied, if I say nothing and offer no review I am accused of receiving a commission and offering no service (and likely getting sued). If I remove commission and charge a fee any premiums saved is wiped out by the fee. If you add to this equation that the client may self help and either go direct or use a comparison site and churn themselves…Something needs to give…let’s give standardised terms a go ( a minimum base as has been suggested and then let insurers compete on bells and whistles/price). I love this industry but I can’t help to think it is heading down the path of robo/direct “sales” for those most vulnerable and in need of proper advice due to conflicts of interest between the FSC & ISA. What I can’t work out is why on earth the so called consumer groups are complicit in all of this (LIF)?
Difference in policy definitions is precisely why we are advisers. We are supposed to know the differences and advise appropriately. Some customers choose just on price others want the best, it is our job to guide them. With standardised definitions this leads to no competition, set and forget and once again disadvantages everyone. This is another reason why you should be doing your job when definitions change for the better. You need to look beyond the group think.
Exactly my thoughts yesterday John….
John please firstly explain how product (which is after all only the funding mechanism, not the reason for you to be in business) “set-and-forget” disadvantages everyone? Secondly, you surely do not set and forget the advice behind the product solutions?? You would have the time to readdress the family’s/business/ current risks, their rebalancing of their balance sheet, their new needs, reduced needs, adaptations to divorce, marriage etc etc. The relationship goes on; the car gets serviced for years but it’s not questioned as to its suitability for the family ongoing. Eventually it gets replaced, yes, but how do you respond to comments below re never being able to give a client the ‘best’ product every day of their lives? Your views are a testament to how well the retailers have divided and conquered – consumers do not win out of that. Apart from any other outcome, the cost of constant product ‘innovation’ is simply passed on to the policyholders. It’s not cheap.
Having standardised definitions leaves no incentive for improvement in policy by the insurance companies and therefore disadvantages clients, it also leads to similar pricing with no competition between companies. This also makes it easier for the directs… if there is no difference in product why see us?
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