Some of my clients believe that insurers simply do not pay out. How can I get around this?
It is important to reassure customers that insurers are there to help them, should the unexpected happen. It is their business to pay claims.
There are cases where insurers are not able to pay out, but only if the claim is not valid. For example, if a claim is made for something that is not covered or in a clear case of deliberate non-disclosure.
However, these are very much in a minority.
The payment rate for life insurance and critical illness policies is very high. For example, in the 12 months to June 2011, Aviva paid 99.7% of life claims and 94.3% of critical illness claims.
People don’t like to think about their own mortality or getting ill. How can I introduce the subject of protection insurance to my clients without upsetting them?
It is true that people do not like to think about ‘what if the worst was to happen?’, but this is part of the problem.
Unfortunately, insurers are all too aware that people are not immortal so it is up to us to help people be prepared for the unexpected.
There is a lot to be said for engaging with people on an emotional level. Facts and figures can paint an interesting picture, but they are just one side of the story.
If we understand the customer more personally and what is important to them, then this can help us to open up conversations.
We also know that some advisers have found it helpful to refer back to our TV advertising, which has helped to put protection in the public arena. Simply asking people if they have seen the ads can be a good conversation starter.
A lot of clients buy protection when they get a mortgage and then see it as ‘job done’ for years. What more I can do to meet their protection needs?
Mortgage life insurance is, of course, important for homeowners, but circumstances change throughout people’s lives so it makes sense to pay attention to clients’ shifting needs.
For example, if people get married and particularly if they have children, there is an opportunity to review their protection requirements.
Again, it comes back to understanding the customer on an emotional level.
Aviva research shows that the cost of raising a child to age 21 is nearly £300,000. So while MLI will help to cover the mortgage, there are so many other costs to think about when children are involved, so it is vital customers are at least aware of these considerations.
My clients have often read stories about cases of claims being rejected because of non-disclosure – sometimes about completely unrelated conditions. How can I ensure this doesn’t happen should they need to make a claim?
A lot of work has gone on in recent years to tackle this issue. Five years ago people may have seen headlines like ‘one in five critical illness claims rejected’ and this was often, in part, due to non-disclosure.
Throughout the industry there has been a sustained effort to educate consumers about the importance of disclosing their full medical history when applying for protection insurance.
Most insurance applications will reiterate this throughout the process so customers can be quite clear about just how important it is.
As a rule of thumb, if people are unclear whether something in their medical history is important, they should share the information with their insurer which can then decide whether it’s relevant.
At times, people can be reluctant if the issues are seen as personal – such as around gynaecological problems or mental health – but it is important to remind people that by hiding history they can invalidate their policy.
Insurers are also helping consumers by adhering to ABI guidelines, which state proportional payments should be made when non-disclosure is innocent.
However, most importantly, full disclosure is the best way of ensuring a claim will be met in full.
Which protection product is it best to recommend: life insurance, critical illness or income protection?
This comes down to the customer’s individual circumstances. It is virtually impossible to give a one-size-fits-all answer as every customer’s needs are different.
The key is that they understand what they are buying and that they understand how each policy works.
For example, if it is important that they have a regular income if they’re unable to work due to illness or accident, then income protection may suit their needs best.
If they feel that a lump sum would be better should they became very ill, then critical illness cover may be a better option.
It is also important that customers understand any restrictions, such as that critical illness insurance only covers a number of set conditions, so they don’t end up being disappointed if they try to make a claim that proves to be invalid.
Similarly, IP customers should be aware of any deferment periods.
As long as customers are informed enough to understand what they are buying and how it can help them, they can then be in a position to work with their adviser to choose the best products for them.
