1 HANDLING INCOME PROTECTION CLAIMS AND ADVISER S ROLE Are you, as a licensed insurance adviser, providing an appropriate level of service to your clients when a claim arises? Training Your Clients In my view, the professional life risk adviser starts the claims process on the day the income protection application is submitted. At that point in time, the adviser should be telling the client what he, the adviser, wants the client to do if there is a possibility of a claim. A professional life risk adviser should say something along these lines to his client as the interview concludes. Unless you instruct us otherwise, we will manage the progress of your claim. To do that, I need you, or someone acting on your behalf, to contact me first, and as soon as possible, if any of the following happens. You suffer a fracture to a bone. You are diagnosed with a serious life threatening illness such as cancer, or heart attack or stroke, or you find still yourself under the care of a medical specialist 14 days or more after the diagnosis of a disabling illness or injury. You are admitted to hospital for more than 3 days or are likely to do so for elective surgery. You injure yourself and attend a medical practitioner and cease work immediately (if applicable). I must stress to you, Mr. Client, that it is important that I am informed as soon as possible so that we can get the claim forms off the insurer and, if necessary, organize for your treating medical practitioner to provide a report and gather medical and financial evidence. A competent and professional life risk adviser should reinforce the above comments every time the client speaks with the adviser. The above list is not exhaustive, but what the list does is highlight the need for good communication with the client at all times and to ensure that communication with the insured in the event of a claim is clear, concise and effective. Starting the Claims Process Experienced life risk advisers know that the majority of insurance companies, when notified of an income protection claim, are likely to do two things. 1. Make errors with the questions they insert in the insured s initial claim form because, try as they might, insurers often fail in their attempt to tailor the questions for the particular illness or injury (as notified to them) and the particular insurance contract that applies to the claim. The latter situation is
2 not applicable to those insurers who only judge claims on one policy, the very latest, because of their constant automatic upgrade policy. 2. Regardless of written faxed requests from advisers with specific requests to send forms to the adviser, try to keep the adviser out of the loop by sending the claim forms direct to the client, who may, or may not, be compus mentus, (of sound mind) and who may, or may not, have someone who can act on their behalf if they are non compus mentus. (means, in a UK legal context: "not of sound mind and understanding") At this point in the process, the adviser must step in. He must firmly insist that the claim forms are sent to him direct, even if the insurer also insists that a set of forms be sent to the client, but it is most important that the claim forms are sent to the adviser. Why the paranoia? It is simple. On a majority of occasions over 20 years of administering income protection claims, it is rare for an insurer to send out the claim documents more or less in a correct form, with all the questions being asked relevant to the cause of the claim. For example, insurance companies are entitled, as part of the client s Duty of Disclosure, to ask for financial proof of the income stated on the original application (whether Agreed Value or Indemnity), but they are not reasonably entitled to insist on asking for proof of income more than that one year before the application or the period of income on which the benefit was based at underwriting. Insurers also ask for pre-disability earnings on the insured s claim form and often for the wrong period. There is never any mention on that claim form, nor in the covering letter from the insurance company to the client, about why pre-disability income information is being sought over the period requested. For example, in the case of pre-disability earnings, and where the relevant policy offers the insured a choice of 3 one year periods of income preceding disability, to establish Pre-Disability Earnings, there is no contractual requirement for the insured to provide 3 years. The insured is able to nominate a particular period (depending on the contract) and instruct the insurer that the figure provided (with proof) is the pre-disability earnings they wish to nominate for the purpose of calculating any partial disability benefit. If the adviser is not on top of this, then at a bare minimum he is going to cost his client accountant s fees because you can bet the client won t have kept his copies of the tax returns. If nothing else, it s a delay. As mentioned previously, the adviser must check that the medical form contains the appropriate questions for the condition causing disability, as some insurers try to tailor these questions and make mistakes pulling the appropriate questions off the word processor. It is the adviser s role to check the questions are reasonably relevant, but you are not expected to be a medical expert, just alert and alarmed, in the interests of your client.
3 Meeting the Client My practice in this situation is to try and meet with the client as far away from the distractions found in hospital wards etc, but it is sometimes necessary to visit the client in those circumstances. I see it as my role to go through those claim form questions oneon-one with the client and help him provide truthful and helpful answers to the questions, and only those questions. It is at this point that the experienced life risk adviser obtains information on what treatment is being provided and what are the indications on when the client might be able to firstly be discharged from hospital, if appropriate, or resume some sort of work. The next step is most important and occurs after you have taken the signed claim forms from the client and are about to post them, or fax or or whatever is your choice. I believe at this point you have to say the following to your client. 1. I don t want you to return to work, partially or wholly, without telling me. At this point, if your client is up to it, and particularly if your client is making noises about getting back into it, an explanation of the Partial Disability rules and the waiting period rules are appropriate, because your client could stuff up his claim at this point quite easily. The adviser had better know those policy rules backwards, and what their current interpretation is with that particular insurer remember, claims handling procedures often change within insurers without notice. 2. Explain to the client that if this claim is a long term claim, i.e. more than 3 months, that they can expect at some stage to be sent by the insurance company, at the insurance company s cost, to a medical specialist for an alternative opinion to that being provided by the treating specialist. You should explain to your client that this is a normal procedure, but you should also explain to your client that he should take notes of what questions he was asked, what tests were applied and most particularly, the attitude of the specialist inquisitor. Your client should be aware that this doctor cannot be expected to be acting on their behalf, but is in fact acting on behalf of the insurer, and the adviser should get a report back from that client on the outcome of the specialist examination. 3. Your client should be aware if the claim goes for longer than 6 months, there is a high likelihood that they will be subjected to a private investigator enquiry by the insurer just to see if there is any evidence of an un-notified return to work. 4. You should also tell your client, if appropriate, they should make notes of conversations they have with persons representing the insurer, because a competent life risk adviser must know what is going on behind the scenes and can t take at face value reassurances from insurers that all will be well. Remember, it is the insurer s aim to get your client back to work as soon as possible. 5. If your experience with this particular insurer is that they either do not provide copies of correspondence to the claimant to you, the adviser, or provide them
4 eventually after much delay, it is the adviser s role to insist that the Claims Section immediately provide you, the adviser, with copies of any correspondence. This action has two purposes a) to keep the adviser informed about what is going on, and b) for you to help the claimant to meet claim requirements and close off dates for ongoing claim forms etc. Quite a few clients will receive these letters and ignore the dates, but be the first to complain when they haven t received their monthly cheque. The First Claim Payment It is the adviser s role to find out if there are any holdups in the claim and ascertain the attitude of the Claims Officer at that point in time. Good claims sections have processes to call the adviser when liability is admitted and action is occurring. In my experience, you should not be too pushy about it and it does help to build up a relationship with the Claims Officer if at all possible. Be aware that some insurance claims officers deliberately seek not to get too close to advisers. Checking the Calculations Last year we inherited two clients because of the stuff up by the then existing adviser on an income protection claim. The client is a female doctor and had a heart attack. The policy had a Crisis benefit for 6 times the monthly benefit payable in a lump sum. The client received a letter from the insurer and cheque for one month s worth of benefit, a refund of premiums and that was it no Crisis benefit lump sum. The adviser apparently did not check the calculation of the benefit, and by virtue of incompetence, cost the client $40,000. When this was pointed out to the client s partner by us, he, like us, was amazed that an adviser had not read the correspondence and if he had read the letter clearly did not understand the policy. Subsequently both of those people have joined our practice. The client who had a heart attack is now $40,000 better off; thank you very much, and we have two clients who refer a lot of business to us. To reiterate, you must check the calculations in the letter provided by the insurer to the insured with claim payments, and note any additional requests inserted in that letter. Mistakes happen often. Oh, and ring the client with the good news. Partial Disability Requirements As mentioned above, it is crucial that the adviser understands the rules relating to the waiting period in general. It is even more important that the adviser understands the rules relating to the requirement for Total Disability days in the waiting period, in order for the insured to be paid Partial Disability from the end of the waiting period. In today s market, there are some income protection contracts which insist that the insured is Totally Disabled for the whole of the waiting period, with a 5 day return to work provision, before any benefits are payable from the end of the waiting period. If you do not believe that statement, have a look at some of the contracts your favoured
5 insurer provides on a seemingly less expensive basis to tradesmen and hard to insure occupations. Advisers cannot assume that the waiting period rules and Partial Disability rules available to your professional clients are also available to your bobcat operators. It is then the adviser s role to ensure that the client, or the claimant, or those looking after him are aware of that rule, and provide advice on what the client should, or should not, do in the waiting period. With a couple of exceptions, insurers require some Total Disability in the waiting period before the claimant can be paid Partial Disability from the end of the waiting period. For example, some require 7 days of Total Disability in the waiting period (some require 7 days of total disability out of in 12 day waiting period). Some companies require 14 days of Total Disability and some companies require those 14 days to be consecutive. The adviser must know these rules or he may disadvantage his client in a claim. Experienced life risk advisers who involve themselves in claims know that there are millions of other ways in which there can be claims problems. At some time in the future, we may discuss a few of these, but I want to end this article with the following comments. 1. You are not a bank employed life risk adviser you do not give your client a 1300 number and say contact the claims people as I am not having any involvement in your claim. 2. You are paid handsomely for this service, and it s part of the job, so don t whinge. It is why some of you take 130% commission so that you can service that claim when it happens. Incidentally, my personal view is that an adviser who charges a claimant for managing his claims is not doing this industry any favours. 3. As silly as it sounds to have to say it, you act for your client and not the insurer and not the dealer, particular if that dealership happens to be owned by a product manufacturer. It is your role to act in the best interests of your client at all times, particularly when they need you the most - at claim time. 4. It is your role to make representations to the insurer if you believe the claim is not being treated fairly and reasonably. 5. Ultimately it is your role to assist a client who wants to lodge an FOS claim against a decision by the insurance company provided of course that the claim totality does not exceed the limit set by FOS. A claim with a satisfactory outcome is the best way to obtain referrals. At an appropriate time, ask the claimant if they are happy with your participation in the claim, ask for a testimonial and referrals. Caveat Venditor