ASIC has released report, which is vital reading for anyone in the financial services and legal sectors, called Life Insurance Claims: An Industry Review. Here is a very brief snapshot of this report:
What is life insurance?
There are four main types of life insurance: Income Protection, Death, Total and Permanent Disability (TPD) and Trauma.
ASIC expressed significant concerns about life insurer’s actions, including:
a. High declined claims;
b. Delays in claims;
c. Poor communication and claims handling;
d. Complicated and outdated policy definitions used to knock back claims;
e. Complicated claims processes;
f. Complicated claim forms;
g. Insurance products which do not meet the expectations of consumers; and
h. Representations made about policy cover which were incorrect.
- ASIC noted, with concern, the conflict of interest created by remuneration packages for claims handlers, whose performance include how many claims they decline!
- 25% of claims disputes arose because of unreasonable requests for evidence.
- 22% of claims disputes arose because of delays by the insurer in deciding a claim.
The average length of time to decide claims is:
- TPD – 21 months;
- Death – 7 months;
- Trauma – 5 months; and
- Income protection – 3 months.
What does all this mean for you?
Life insurance products are very important for people depending on their circumstances. Imagine if you fall ill or get injured and cannot work. How do you pay bills, school fees, mortgage, and medical expenses?
Insurers often blame lawyers for increased claims and claims costs, therefore increased premiums.
This ASIC review suggests that is an excuse that simply doesn’t stack up. Insurers have purposefully created complicated and outdated insurance policies, with poor claims handling practices and understaffed departments.
Legal advice will level the playing field and give people a fair go at receiving their insurance cover, often after many years of paying high premiums for such cover.