Financial planners must keep insurance companies honest and ensure clients are paid their maximum claim entitlements, with the number of payment errors soaring in the last year, according to Principal of Integrity Resolutions Col Fullagar.
He said advisers had a responsibility to double check that claims were paid in full, warning that errors were often “contractually subtle” and difficult for inexperienced risk writers to identify.
“I’m dealing with a number of cases where the claim has been admitted and paid, and I’ve been called in to check a component of the payment and when I do, I find significant errors,” he said.
“I’m not talking about one or two per cent or thousands of dollars. In some cases, the payment is off tens of thousands of dollars, or up to 40 per cent, and in every case in favour of the life company.”
Fullagar, formerly national risk manager at RI Advice, left the ANZ-owned dealer group in mid-2012. Since then he has been working full-time on Integrity Resolutions, the claims management business he established in 2000.
The firm, which specialises in “problematic” and disputed claims, has been fielding a steady stream of calls from advisers and policy holders about errors in benefit calculations in favour of the insurer to sums of over $100,000, according to Fullagar.
He cites, as an example, a recent case where a client had been paid monthly income protection benefits over a 12 month period. Fullagar successfully proved that the magnitude of the error was over $100,000.
“When the error was pointed out to the insurer, they denied it. Later they agreed that it was an error and they repaid the policy holder but they never apologised,” he said.
“It surprises me that some insurers are completely reticent to accept accountability for their mistakes and when asked to clarify information, it may take weeks or months for them to get back to you.”
Another disturbing trend that Fullagar has observed in the last year is that the same insurance companies are repeatedly in disputes with policy holders while other insurers receive no complaints at all.
“Complaints from advisers and clients about poor response rates, poor contractual interpretation, mistakes and high levels of frustration are concentrated in half of the insurers,” Fullagar said.
“I don’t believe these problems are widespread, they are disproportionately concentrated in half the insurers. People wonder why insurance companies have such a bad reputation and it’s because of this sort of thing. When an insurance company makes an error it has such a big impact on someone’s life that they talk about it long, far and wide.”
