Advised insurance claims paid more often than direct

The regulators’ life insurance claim statistics for June 2020 revealed that in the 12 months to June, 96 per cent of claims for death cover, 85 per cent of trauma claims and 81 per cent of TPD claims on advised insurance products were admitted by insurers.

This compared with 89 per cent of death claims, 87 per cent of trauma claims and 61 per cent of TPD claims being admitted across the direct insurance channel.

APRA commentary in the report suggested that the variance may be due to advisers assisting their clients to understand the inclusions of insurance products, and discouraging them from making claims that would not be accepted.

However, claims admittance rates were higher for TPD and death claims in the group super product category, with 98 per cent of death claims and 91 per cent of TPD claims admitted.

When it came to the claims paid ratio – or the dollar amount of claims paid versus the annual premiums receivable in each category – advised products also scored higher than direct, with a 42 per cent payout ratio for advised death products versus 40 per cent for direct, and a 49 per cent ratio for advised TPD versus 35 per cent for direct.

However group super insurance also scored higher than advised here with an 85 per cent payout ratio for death products and 95 per cent for TPD.

But the regulator cautioned in its commentary not to interpret the statistics “as a measure of consumer value or product profitability”, saying that both direct and advised products had higher acquisition costs associated with their products than the group category.

Across the board, trauma insurance products had the worst claims outcomes out of any product category, with 15 per cent of finalised claims declined over the 12-month period.

The reason for 71 per cent of these claims being declined was that contractual definitions within the policy had not been met, according to the regulators’ data.

TPD products were slowest for claims processing times out of all the product groups, with just 66 per cent of claims received in the 12 months to June having been finalised by the end of financial year. 

The data revealed that 38 per cent of TPD claims took between two and six months to be paid, while 21 per cent took between two weeks and two months, and 19 per cent took between six and 12 months.