Life Insurance: Time for a dose of reality

Every day consumers are presented with advertising and promotional materials from life insurers that portray happy families benefiting from the peace of mind that comes with having Life Insurance.

But is this really an illusion?

For the majority of people with Life insurance, their cover fits their circumstances and if they need to make a claim there aren’t any problems.  In fact, annual Life insurance claims paid in 2016 exceeded $9 billion.

However, for some the reality does not live up to the hype when their claim payment is reduced or declined.  In fact, a recent survey by PWC identified that only 42% of people believe their life insurer will be there for them when they make a claim. In addition, underinsurance in Australian continues to be a problem, which is sometimes exacerbated by people not having enough cover to manage their financial commitments.

The Law of Unintended Consequences

Whilst most people with Life insurance are happy with their cover, there are a few reasons that can contribute to poor outcomes and unforeseen and intended consequences:

Lack of Understanding: Many people do not understand some of the differences between the policy types available. Some policies are “automatic acceptance” or “partially underwritten” meaning you answer only a few health or lifestyle questions and you’re covered up to a set level. These policies usually contain “exclusion” clauses which apply to pre-existing medical conditions that may affect payment of your claim. Fully underwritten cover can give more certainty as you answer more questions at the time you apply.

Lack of Brand Familiarity: There are many different types of companies that you can buy cover through, such as Life insurance underwriters (e.g. NobleOak), or third party distributors. With so much choice, people often can’t distinguish which company to trust and fall back on price as the main way of making a decision to purchase without going into the detail of what is included in the cover.

Lack of Trust: There has been a significant erosion of trust in the Life insurance industry highlighted by the findings in the Banking Royal Commission of systemic issues within some of Australia’s biggest and most respected financial services companies. Lack of trust can result in people shopping around for the “best price” rather than the “best cover” for their circumstances.

Time for a dose of reality

At NobleOak, we offer comprehensive Life Insurance direct, without adviser fees or high built-in overheads. Our products are fully underwritten and tailored to your individual needs. This means we take the time to get to know you by asking a number of health and lifestyle questions when you apply. And if you need a doctor’s report or blood test we arrange these and pay all the costs.

Applications can take a bit longer up front, but most importantly, we take all the worry away as there’s more certainty at claim time because we already have all the information we need.

That’s why we call it ‘no surprises cover’.

 

Sources:

Rice Warner Life Insurance Adequacy

Life insurance adequacy

APRA/ASIC report

https://www.apra.gov.au/media-centre/media-releases/apra-and-asic-release-new-life-claims-data

Claims Paid 2016

http://riskinfo.com.au/news/2017/06/06/life-insurance-claims-pass-9-billion-in-single-year/

Margaret Rochford

13 August 2018 - 5 minute read