Those taking part in an Acenda webinar heard that as the disability landscape evolves, advisers must carefully assess the exact needs of their clients when discussing TPD cover.
Marshall Ross, the firm’s Partner Education Manager, reminded advisers that their clients are being pulled in many directions when it comes to their finances, and that advisers need to be strategic when recommending the level of cover.
He advocates that when it comes to TPD, advisers should prescribe the minimum amount of cover needed. In other words, zero-in on the risks clients want cover for, and prepare a policy that meets it – and no more.
Using medical parlance, he referred to it as “the minimum effective dose”. Not too much, and not too little to protect their client.
“The challenge we’ve got, particularly from a TPD perspective, is that it’s a big bad world out there and there is a huge range of different things that could happen from a TPD perspective,” said Ross.
“From an occupational perspective there’s a threshold that I have to meet to have a claim paid, but there’s a whole range of events that could be above and beyond that threshold.
“I only need to meet that lower threshold to have a claim paid, and this becomes really challenging. How do we deal with that?”
Without being able to predict what a client may face in the future, he said advisers are in an impossible position.
“The way to approach it is through the concept of best estimates,” he said.
Advisers have to make assumptions to account for different things, but it’s educated advice…
“Our best estimate really is valuable to us as part of our philosophy when we’re building-in how we deal with disability cost. It’s upfront and honest.
“You acknowledge the limitation, saying it’s simply a best estimate and has limitations. This is really freeing because it doesn’t position us as having an exact solution.
“If the client has an expectation at claim time for TPD, that all possible scenarios and costs and events are going to be accounted for as part of that, then there’s a chance they’re going to be disappointed.”
It’s all about finding common ground, says Ross – a palatable premium for acceptable cover.
“Advisers have to make assumptions to account for different things, but it’s educated advice,” he said.
“We’re using data, we’re using probability and statistics, we’re taking an analytical approach so we arrive at the best option for the kinds of expenses that people might incur.”
The absolute goal, says Ross, is for advisers is to be transparent so clients understand what they are and are not covered for, having made “an informed decision”.
Click here to watch the full webinar.
