We live in a society where increasingly the internet and company call centres are giving people the opportunity to transact in a quick, hassle-free manner with an instantaneous result.
The Direct insurance market is one sector that we are quite concerned about, the risks associated with placing personal insurance in this way far outweigh the perceived benefits.
A recent sector wide investigation by the Australian Securities Investment Commission (ASIC) highlight some of the concerns.
ASIC found that highly incentivised sales staff were pushing unneeded products on customers who often ended up cancelling the policies or being rejected when they made a claim.
Claim rejection rates are notoriously higher through the direct channel, compared to policies put in force by advisers or obtained through superannuation.
ASIC’s direct insurance investigation found that one in five policies were cancelled during the cooling off period, suggesting the product was unwanted in the first place. After this, 25 percent of all policies were cancelled within 12 months, and a third of all policies were cancelled within 3 years.
Moreover 15 per cent of all claims were rejected, with nearly one in three claims withdrawn by the customer after being unable to claim or making a mistake.
Our strong preference is that clients go through a thorough process which properly identifies what type and level of cover is required, that the cover is underwritten at the time of application and there is a robust review process to make sure the cover that is put in place remains appropriate.
Mark Bullen from TAL sums it up well when he says that "there are many factors that can make buying insurance direct a challenging prospect for some: complicated personal relationships or medical history, extensive financial obligations, or various forms of income and lifestyle goals."
Mark then goes on to say that "An adviser can provide recommendations on the right amount of cover for your lifestyle, the best way to structure your policy, whether to have insurance cover inside or outside of super, and how to navigate the underwriting and claims process."