Life insurance has continued to rank low with the Financial Ombudsman Service, which has told the Banking Royal Commission that only around five per cent of systemic issues identified by the service related to life insurance.
In its submission to the Commission, FOS stated that of the 463 issues identified and resolved by product line over the past decade, life insurance accounted for only 20 cases, or 4.3 per cent of issues, well behind credit related issues (238), general insurance (86) and investments and advice (49).
…life insurance disputes made up only 3.7 per cent of all disputes received…
Of the 395 issues identified and resolved by member category over the past decade, life insurers only accounted for 21 cases, or 5.3 per cent of issues, compared with banks (214), general insurers (71), credit providers (66) and financial advisers (23).
These low numbers were also reflected in the low level of disputes related to life insurance received by FOS over the decade since 2007.
The service stated that, on average, over the last ten years, life insurance disputes made up only 3.7 per cent of all disputes received and the level of disputes received year on year had fallen since 2014 to its lowest point in 2017 of 3 per cent.
FOS stated the most common systemic issues with life insurers were:
- Inadequate claims handling processes
- The cancellation of policies
- Policy interpretations
- Processing errors
It also noted that the most common disputes were the result of actions taken by life insurers and relate to claims involving income stream products.
“It is our experience that life insurance disputes generally arise as a result of the application and interpretation of policy definitions where the definition is overly restrictive, ambiguous or outdated,” FOS stated.
“Financial advisers were involved in more than half of all of these unpaid determinations…”
“We have found that certain definitions have not kept pace with current clinical, medical or diagnostic tools. Typically these matters also involve instances where community expectations about what a policy covers differ from the highly technical definitions in policies and narrow interpretation applied by the insurer in assessing the claim,” FOS added.
The Ombudsman was, however, less complimentary on the level of unpaid determinations owed by financial advisers.
It stated that “…while the issue involves only a minority of our members who provide financial advice, the level of unpaid determinations at the end of December 2017 was almost one-quarter of all determinations made in our investments and advice jurisdiction”.
“Financial advisers/planners were involved in more than half (55%) of all of these unpaid determinations, followed by operators of managed investments schemes (13%) and credit providers (10%),” the submission stated.
Gee !!! I wonder if the low numbers of life insurance disputes lodged with FOS, and in particular income protection disputes, are anything to do with the ridiculous LOW jurisdictional levels held by FOS, with ASICs approval. $6750 per month is just ludicrous for an income protection dispute, What ASIC have done with IP claims is to dis-endorse IP claimants earning more than $108,000 pa, presumably because those folks can afford lawyers. Justice for some, but not all!
Alternatively a desperate claimant is forced to agree to sign away his rights to the difference between the jurisdictional upper limit and his actual benefit. On a long claim, that reduction in claim could kill the claimant before his principal sickness or injury.
Sounds like another victory to the FSC. And where were our ( consumer focused ) “professional bodies” when that limit was set
So life insurance advisers clearly doing the right thing in 96.3% of the time? Why then the ongoing attacks by ASIC, FSC, media etc against advisers doing the right thing? Why do these insurance advisers suddenly need a degree to continue to do the right thing by their clients, when clearly they are doing so already?
It was about a year ago, maybe longer, when these same statistics were cited in an edition of Riskinfo. Unfortunately they were ignored then and they will be ignored now. There was no way advisers were ever going to come through this unscathed! The fact that the FSC tried to have the direct insurers exempt from the LIF goes to show where their true loyalties lie. They’ve all had it in for us from the start!
Huh? How’d you get the stat that advisers do the right thing 96.3% of the time? It doesn’t say that – and if it did a royal commission might be in order! There is no way I’d be happy if advisers are doing the wrong thing 3.7% of the time! Based on the number of adviser / customer interactions a year, we’d be looking at thousands of customers each year having advisers doing the wrong thing. Luckily the stats paint a much more positive picture than that.
And the hits just keep on coming….. Does anyone else feel like a jukebox? No problem with Churning, no problem with insurance companies paying claims and now life insurance disputes with FOS have a very, very low ranking. What was the problem with our industry, so much so that laws had to be changed?? oh that’s right, insurance companies were losing money and wanted advisers gone. Don’t worry the AFA and FPA will go into bat for us and sort this out for us. What a joke!! as long as we get to keep our seat at the table we will just do what the FSC want us to do and we will do it #toethelineorelse.
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