Why risk insurance and advice are inseparable

The prudential regulator APRA recently issued its biannual life insurance claims and disputes statistics revealing that for all claim types (death, TPD, trauma, DII, and accident), 91 per cent of claims were admitted for advised individuals compared to 85 per cent for non-advised individuals.

This statistic highlights the overall positive impact professional advice brings to improve the chances of a claim deemed successful — and the improved outcome for the client and their family.

Looking behind the top line claims results, we see a similar positive trend for each of the specific risk insurance types. APRA’s April 2023 report (based on data to December 2022) showed:

• 98 per cent of death claims were admitted for advised individuals versus 92 per cent for non-advised
• 87 per cent of TPD claims were admitted for advised individuals versus 77 per cent for non-advised
• 88 per cent of trauma claims were admitted for advised individuals versus 84 per cent for non-advised

The client-adviser relationship during claim time, in what is often an emotional period for the insured person, provides that additional “reassurance safety net”.

In other words, risk insurance advisers perform a highly specialised, professional function to fulfil a crucial link between the client and the product provider that is assessing the claim.

The adviser’s technical expertise, communication skills, core understanding of insurance underwriting and design, and the ability to professionally intervene on behalf of a client, is a critical part of the end value to the client.

So, behind the story of the APRA claims data exists a client-adviser relationship built on trust and the respect of the inherent professional skill of the adviser. However, modern professional advice systems, standards, and claims support have not always been so readily evident.

In fact, an age-old “wisdom” — some would say misconception — of life insurance is that risk products were a commodity that were sold, not bought. This harks to another era of salespeople or “agents” of life companies signing up Australians door-to door to the concept of protecting their biggest asset — their lives and incomes.

These tied agent sales processes are mostly part of a bygone era. An educated, professional advice (not sales) process is today an evolved and valued part of the modern relationship between risk adviser and client.

From educating and guiding the insured person through the various and often complex risk insurance options, securing the right underwriting at the right price based on a comprehensive needs analysis and fact find is vastly different from cold call knocking on a stranger’s door and convincing them to sign up to an insurance policy.

And — as the APRA statistics demonstrate — in unfortunate cases where a claim against a life policy is required, this is a clear point at which maximum value of the advice is delivered and appreciated by the insured client.

The APRA claims data backs other research sources that have sought to quantify the value of advice in all parts of a client’s life, including their investments and financial wellbeing. For example, Russell Investments’ 2022 Value of an Adviser Report shows the total value of services provided by a financial adviser is substantially higher than the typical advice fee and that the role of advice cannot be underestimated.

Providing good advice to the client is a core foundation of the modern advice process. But for the client, value is also present in other parts of the relationship.

At review time, for example, when sitting down with the adviser and assessing the ongoing suitability of the risk and investment product(s), reviewing the market offerings, and making recommendations on the best approach to protecting the insured person’s changing life circumstances.

At the end of the day, the foundations of quality advice, combined with the ongoing need of clients to match their personal circumstances with evolving product choices and innovation means that, for us at least, risk insurance and advice are inextricably linked and indispensable.

Marcello Bertasso, head of underwriting and claims management, PPS Mutual