The cost of non disclosure in Life Insurance can be high!
The internet is a great tool making it easier and faster to buy your personal insurance products like life Insurance, total disability insurance and income protection insurance within minutes. The challenge is for insurers and advisers alike to make sure clients understand the need for full disclosure.
When you receive your life insurance policy in the mail you want to know that you are fully covered. To do this you must fully disclose to the insurer all the relevant information they need to know so they can asses the insurance risk and provide you with an offer of insurance.
This is called the underwriting process. You the client make an offer to the insurer to insure you for a certain risk, like if you suffer from an accident or sickness. Assuming you have no pre existing conditions the insurer provides you an offer at what is called standard life insurance rates.
Although if you have any pre existing conditions you may be offered terms at what is called sub standard rates. You then decide if you accept or reject the offer made by the life insurance company.
This process would normally take 1 to 3 months from when the advisers first meets the client usually taking 2 to 3 appointments then submitting a paper based application to the insurer to fully underwrite a case and provide an offer of insurance using conventional methods.
Life insurers are trying to streamline this process using the internet and very complex online underwriting forms.
In a relatively short space of time we have seen the introduction of e- apps, e- signatures, tele underwriting, underwriting engines and more aggressive and acceptance of pre existing medical conditions. We are also seeing more acceptance of policies that would have been issued loadings are now offered standard terms.
Acceptance of cover online is essentially immediate. You can now organise a life insurance policy and be offered a policy that day!
ING have reported that 55% of their new business is submitted using e–apps online engine and 33% of that is issued at standard rates.
This is a fantastic result for the consumer, financial planner and life insurer.
However a possible problem created with speed and efficiency is… has the correct full disclosure been made?
With online applications the initial face to face meeting with an adviser and client is now lost with some customers choosing to buy pass this process altogether and just buy their life insurance online. The “know you client rule” is a now more challenging process with diligent advisers making sure they probe the client over the phone all those medical questions.
CCA Financial planners has a dedicated web page to helping consumers across Australia buy their life insurance online and in our experience we have found in some instances consumers are failing to disclose all there medical history.
This is very unfortunate as it wastes a lot of time for the customer, insurer and us. This is despite our constant encouragement to fully disclose and the importance of that disclosure for medical history and specific occupation duties in the case of income protection insurance.
Part of our process that I have refined over the last 20 years experience is too show clients our claims testimonials and the relevant claims stories this brings up in our discussion on the importance of full disclosure.
This engaging process usually flushes out more disclosure which is great for the customers as life insurance is really the promise of financial certainty and you can only deliver on this if a policy is issued with full disclosure.
At CCA Fp we aim to deliver on creating financial certainty by:
- Encourage full disclosure with our client engaging process
- We highlight claims are successfully paid when full disclosure is made
- We highlight that insurers do check answers by writing to you doctors, medicare or accountant for Income protection insurance.
This re checking of your insurance policy at claim time is what is called re underwriting the case. In some of our cases we have found insurers to write off to medicare to determine which doctors a client has seen in the past. This can take up to 8 weeks to collect the data and if there is any further non disclosure a claim may take months to get settled if at all. This is were our priority claims service can prove invaluable.
It really makes sense to fully disclose when you initially apply or it could cost you dearly.