Thanks for all of the positive feedback to last month’s update highlighting the out-of-pocket cost burdens people encounter when suffering unexpected injury or disease.
It is an awful topic, but it is one we need to have as professionals in an industry that is legally, ethically and honour bound to provide our clients with the best possible advice. This is information people need to have in order to make informed decisions in challenging times.
In the last update, I also touched upon how it is a common occurrence now during client reviews ‒ and even in conversations with other advice professionals and referral partners ‒ that people are so focused on insurance premiums, reducing them, or cancelling insurance, that they fail to consider the value of the financial safety net provided by that insurance.
It is a challenging conversation to have but as an industry we have to got find ways to move the conversation away from purely focusing on price, to one of serious consideration of the value provided by the financial risk management plans we recommend to our clients.
That was why, last month, I sought to highlight the actual out-of-pocket cost burdens associated with suffering from various medication conditions.
It is also why this month I want to talk about how we at AFRM seem to be forever dealing with what I call “retrospective claims” on behalf of our clients.
These are cases in which it is only through a discussion with a client that we discover a past medical event has occurred that merited a claim against the client’s insurance policies, such as Trauma or Income Protection insurance.
(As you would appreciate as one of our referral partners, by the very nature of our business as a specialist risk advice practice, our client contact is less frequent than is the case with other types of advice businesses.)
You may recall that we have published case studies of this kind in the past but more recently we have again dealt with a number of such cases, so it seems timely to again flag this issue.
AFRM’s advisers and claims team are constantly surprised when routine discussions with clients reveal instances where a client has suffered an injury or medical episode but failed to recognise it as a valid claim. Again, this is not a new phenomenon.
Back in April 2019, we published a story about one of my clients, William (named changed to protect client privacy). Through the course of a review discussion, that commenced with William flagging he was aiming to reduce his Trauma insurance cover, I asked William how he had been in terms of health and happiness through the past year?
William told me he’d been diagnosed with Type 1 Diabetes earlier in the year and was being treated with insulin injections four times per day. For whatever reason, it had not occurred to him that this was a valid claim under his Trauma cover.
Soon after the Trauma claim benefit had been deposited into his bank account, William called me and said: “I paid off my mortgage yesterday and it feels great, thank you.”
That is the value of Trauma cover. It allows you time. It allows you choice. It takes away emotional and mental stress on top of just the basic costs of medical treatment and various other things, including having a bit of time off work.
Financial stress as a causal factor in mental ill health among Australians (and subsequent delays in return to health) are well documented. Clients often comment about a “weight being lifted off their shoulders” when they know they will be able to pay the bills as and when they fall due.
We have many other examples of our clients, at first, not recognising the true value of the financial safety net they have worked with us to create, not just for themselves but for their family, and even business partners in a number of cases.
That reminds me of another client Paul and his wife, Julie (names changed to protect client privacy). This one was not so much a retrospective claim but one in which Paul initially never considered Julie, as a homemaker and housewife, would ever need Trauma cover. Then, several years after putting Julie’s cover in place, she was diagnosed with skin cancer, requiring surgery.
Paul suspected it may be a valid claim and called us for our expert opinion. The Trauma claim we subsequently managed through to completion for Julie provided her and the family with a benefit of about $500,000.
That’s what I mean about Trauma cover taking away the emotional and mental stress on top of just the basic costs of medical treatment.
Another very recent case is a classic example of what I mean, both, about retrospective claims and about focussing on the value provided by a financial risk management plan, rather than just on the cost of insurance premiums.
This claim is still underway so I will keep my description of the case as broad as possible.
While scheduling a review meeting earlier this year, husband and wife clients, flagged they were concerned about the high cost of premiums and wanted to re-examine if the cover provided merited the outlay on premiums.
During the subsequent review meeting, I asked how they had both been health-wise over the time since we had last caught up?
The husband; let’s call him John, for the sake of this example; revealed he’d had a major medical episode several weeks earlier and had to be rushed to hospital in an ambulance. He’d even received shock treatment via a defibrillator on the way.
Despite the seriousness of this incident, it had not occurred to John that this episode merited a claim under his Trauma insurance. Again, the very same insurance that he had questioned the merit of continuing to pay the premiums.
I had to counsel him not to make any changes to his current insurance policies until such time as we had investigated filing a Trauma claim on his behalf. I also had to point out that having had this recent serious medical episode may hinder his ability to get new policies on terms as favourable as those he already had.
It is for this very reason that I ‒ and all of the advisers at AFRM ‒ make a point during every review meeting of asking our clients how they have been since we saw them last. Quite literally, something like: “Have you had a health event in the last year?”
Again, the point of all these examples is to move the client conversation away from simply discussing the cost of premiums to instead focussing on the value provided by the financial risk management safety net their insurance cover provides.
Perhaps, the next time you may be having a conversation with your clients about insurance premiums it may be worth citing some of the case study examples I have provided here today, or some of the hard numbers of the financial cost of suffering a serious health condition or disease provided last month?
Perhaps, at the very least, say: “If you are thinking about making reduction in insurance or cancelling your policies, perhaps you should first consider having a full medical done by your GP or specialist doctor before making such a vital decision?”
That’s exactly what AFRM adviser, Sam Brennan, advised a client in 2019 who wanted to cancel much of his cover. The subsequent medical examination revealed the client had prostate cancer! You can read that case study here.
We see it happen time and again at AFRM, but we are proud of the value we add if and when the time comes that any of our clients need to make a claim.
We are proud of the fact that we have achieved well over $200m in claims paid to our clients. At the end of the day, what price can you put on the financial security of your loved ones and yourself?
Sincerely,
Rob Vitnell
Managing Director AFRM.
Case Study:
In past case studies we have highlighted times when clients have not recognised valid life insurance claims at the time they have occurred. The claim only being picked up some time later when the client’s AFRM adviser became aware of the event. As such, it becomes what we call at AFRM a “retrospective” claim.
This case study is a variation on that theme. This is the story of a woman with a strong work ethic and driven to succeed. So much so that even when she was enduring ongoing medical issues over an extended period of time, she never seriously considered checking if she had a claim on any of her three life insurance policies.
Not because it didn’t occur to her but more because she simply did not want to make a claim!
Let’s call her Sophie. [Name changed to protect client privacy]. Sophie is a long-term AFRM client, referred to us by an accountancy practice with which we have had a long-standing good relationship.
When Sophie and her husband, Patrick [name changed to protect client privacy] first came to AFRM, she had no Income Protection (IP) insurance cover but did have less than appropriate levels of Death and Total and Permanent Disability (TPD) cover through her superannuation fund.
Patrick had IP cover ‒ but like Sophie ‒ held insufficient levels of Death and TPD cover through his superannuation fund to adequately provide financially for their two children and Sophie if anything should happen to him.
Patrick had stepped away from developing his own business to be the primary carer for their two children while Sophie poured herself into her new professional services practice, determined to succeed as the family’s primary breadwinner.
She had been doing well, the previous financial year drawing a significant six figure income from her practice to support her family.
It is hard to say what motivated Sophie’s drive to succeed. She had prior medical problems with her back. Both children attended a not inexpensive private school. And with a growing firm, she had to generate sufficient billings to cover the cost of employing her small team.
Whatever the reason, it was not uncommon for Sophie to work 100 hours a week developing her practice.
After AFRM’s initial review of the family’s financial position, protection was put in place to ensure that no matter what befell the family, there was sufficient levels of IP, Death, TPD and Trauma insurance to cover all their existing debts and to provide financial resources into the future.
By late 2016, Sophie held four separate life insurance policies:
Agreed Value IP cover offering a benefit of almost $14,000 per month through to the age of 65 (with an exclusion for any health issues relating to her back)
Life insurance through the family’s Self-Managed Superannuation Fund (SMSF) providing almost $3m to beneficiaries in the event of her death
Life and TPD (Any Occupation) through a separate superannuation fund, and;
Life and TPD through yet another superannuation fund (this providing the lowest financial benefit).
As result of her 2017 annual review with AFRM Adviser, Phil Hatherly, Sophie’s financial risk management strategy was refined. Some Life and TPD benefits through a retained industry superannuation fund, providing the lowest financial benefit, were terminated.
However, the level of IP cover was increased, as was the level of Death cover provided by the family’s SMSF.
Skip forward to Sophie’s 2018 annual review with AFRM and Phil became aware of an incident in early November 2017.
Sophie had collapsed at work complaining of blurred vision, severe chest pains and pain radiating across her left shoulder. As a result, she was admitted to the local hospital’s Emergency Department. Her discharge form, when she was allowed to go home later that day, noted further investigation into the potential cause was needed.
As Phil dug deeper into the background, it became clear Sophie had been suffering symptoms including a persistent cough, migraine and chest pains for months leading up to her collapse.
The symptoms had persisted through 2018, with a few new ones added, including, flu-like symptoms, episodes of pain down her left side and general weakness in her left arm.
In May 2018, she was referred to a Cardiologist in a bid to find the source of her ongoing bouts of chest pain.
Despite her health challenges, Sophie had been soldiering on, working long hours to ensure no disruption of service to her clients. However, her ability to continue to work long hours was fading.
She had been forced to take time off sick several times through 2018.
To say AFRM’s, Phil Hatherly, was dismayed and distressed when he learned of this medical history would be an understatement.
Through discussion with Sophie it became evident that despite having insurance protections in place, she had never really expected she would ever need to claim. Further, it seemed pride made Sophie reluctant to want to make a claim ‒ even if she had good reason.
At Phil’s urging, Sophie revisited her medical history with her General Practitioner and Cardiologist. Phil was seeking medical evidence to support both a Trauma and potential IP claim.
By November 2018, Phil had finalised all of the paperwork and had obtained all of the supporting medical reports to support an IP claim.
In January 2019, Sophie’s insurer accepted her IP claim with a monthly benefit of around $14,000, subject to monthly reviews of medical evidence to demonstrate that she continued to be unable to work full-time.
A back payment going back to the date of the initial collapse in 2017 was also approved, providing valuable additional funds above and beyond the ongoing monthly benefit.
Meanwhile, Phil kept pursuing the documentation required to support a claim on Sophie’s Trauma insurance. This included getting an MRI brain scan done to look for evidence to explain episodes of memory impairment that had begun to develop, along with transient ischaemic attack (TIA) episodes (which occur when the blood supply to your brain is blocked temporarily).
By July 2019, Sophie gave Phil her completed TPD/Trauma claim form with supporting doctors’ reports from her GP and Cardiologist.
After reviewing Sophie’s history of symptoms, the collapse in November 2017 and the results of the MRI done in February 2019, her GP had declared a diagnosis of stroke and heart issues that he attributed to the original collapse back in November 2017.
He noted a history of stroke in Sophie’s family. The GP’s diagnosis was supported by the Cardiologist.
In August 2019, her insurer advised Phil that the Trauma claim had been approved and that more than one million dollars had been deposited to Sophie’s bank account.
Phil called Sophie immediately, and to say she was overwhelmed is an understatement. The payment cemented their ongoing financial security.
The funds have allowed Sophie to step back from day-to-day management of her business, comfortable in the knowledge that there are sufficient finances in place to look after her family’s needs for the long-term.
The outcome has also been rewarding for Phil, who is now enjoying seeing Sophie take some time to enjoy her life, ongoing medical issues aside. It is apparent she will never fully recover but financially the future is a lot brighter.
For Phil, the lessons to be learned from this case study are clear.
“We always need to be mindful of a client’s situation,” Phil said.
“Sometimes a client is not forthcoming with issues that he or she may find difficult deal with, let alone come to AFRM to discuss.”
“Claims are a ‘bittersweet’ event – it is distressing to see any client going through severe medical issues, and the impact it is having on them, their family and their business.”
“But when the claim is approved, and the funds start flowing, it is a case of ‘job well done’ – what we advised and implemented has truly worked and provided the financial relief that we always advise clients to seek to achieve.”
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