In­sur­ance heaven and hell

Kapi-Mana News - - FRONT PAGE - ROB STOCK MONEY MAT­TERS rob.stock@fair­fax­me­

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


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.

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