Insurance heaven and hell

You have a choice of going through one of two doors. One leads to heaven, one to hell.

You’d like to have a clue as to which was which, wouldn’t you? And rightly so. There’s quite a lot at stake. Now, think of those two doors again.

Instead of being the doors to heaven and hell, they are the doors to two life insurance offices.

Both are offering the life, trauma and disability insurance people buy to see their family right in case they should die or fall very, very sick. But one insurer is hell to deal with at claims time, and declines 31 per cent of trauma insurance claims, while the other is heaven and declines just 5 per cent.

Again, you would want to know which was which.

Well, Britons now get information about the claimspaying rates of their insurers, and Australians will do soon, following the horror findings of a review by consumer watchdog

OPINION:

ASIC, the Australian Securities and Investment Commission.

New Zealanders deserve no less, but there’s nobody pushing for it. Incidentally, I didn’t make that 31 per cent figure up.

Prompted by awful claims against one insurer (CommInsure owned by Commonwealth Bank of Australia), ASIC’s review found there were insurers you really did not want to be with.

It found 90 per cent of claims were paid in the first instance, and just 4 per cent of life insurance claims were declined. But it also found 16 per cent of total and permanent disability insurance claims, and 14 per cent of trauma insurance claims were declined.

Three disability insurers had decline rates of 37 per cent, 25 per cent and 24 per cent. For trauma, one had 31 per cent, another 25 per cent and another 21 per cent.

Those levels are morally disgraceful. ASIC didn’t reveal the names of the insurers with the highest decline rates. Insurers reviewed included AIA Insurance, Onepath Life, Suncorp Life, AMP Life, Westpac Life, Allianz Australia Life and Suncorp.

We don’t know Kiwi insurers’ claims decline rates. But all those Australian companies have sister operations here, and CommInsure owner CBA also owns Sovereign. Why so many declines? Some policies have very restrictive definitions, for example, trauma policies which turn out not to cover some heart attacks.

People accidentally fail to tell the insurer something when applying for insurance, for example, not realising a minor health event 10 years ago was a ‘‘preexisting condition’’ the insurer could later use to decline a claim.

An insurer decides it doesn’t have to pay, when in fact, it should. Let’s charitably call those mistakes. ASIC also found that people who bought insurance through advisers are less likely to have a claim turned down.

Hopefully, once the Aussie public gets its data, New Zealand will follow. Until then, it’s buyer beware, only without the information buyers need to make good decisions. It might be time to read your policy, get a copy of your application, and medical notes, and ask your insurer to check you have disclosed everything.

GOLDEN RULES: Take care when applying for insurance, know your medical notes, don’t take no for an answer at claims time.