New, improved claims model key to building trust in life insurance.

New, improved claims model key to building trust in life insurance.

At its heart, life insurance should be simple. The insurer is paid a fair price in good faith for a policy which has been clearly explained. When the unexpected happens, the insurer responds quickly and fairly, and treats the insured with respect. Both parties win.

However, as the Hayne Royal Commission revealed, not all providers were seen by the community to hold up their end of the bargain. Some of the most shocking case studies were engaged in wilful wrongdoing and claim avoidance, but these were a minority of the industry as a whole*. Equally, however, the structure of the industry and providers’ business models were also responsible. Opaque policies and convoluted claims processes combined with conflicted commission and remuneration structures often resulted in inappropriate outcomes for Australian consumers. The effect was that trust in life insurance diminished.

The good news is that the majority of life insurers are working hard to address the issues identified in the Royal Commission, and the Life Insurance Framework, plus the industry’s COVID-19 response, has laid the groundwork for this.

 

How did the life insurance industry end up here?

There is no simple answer to this question, unfortunately. In addition to the conflicted remuneration and commission structures, the fact that life insurance is dominated by a relatively small number of key players, and that financial services in Australia are highly vertically integrated, have all contributed to the problems highlighted by Commissioner Hayne.

Despite calls for bans on commissions, there are strong arguments for why they should be retained – it’s not a black and white issue. In many cases, work done by a distributor or broker is not charged as a separate fee. If it was, the argument goes, fewer Australians would seek or have access to life insurance, and the widespread problem of underinsurance would become worse. Indeed, many of the larger insurers continue to argue, post Royal Commission, that the removal of commissions will serve only to reduce competition in the market, increase consumer risk and ultimately empower large institutions.

At the same time, the necessity of finding ways to control conflicts of interest within a commission structure is clear. There are risks inherent in a sales-driven, commission culture for both consumers and insurers. For consumers, it’s the risk that unscrupulous brokers can be financially rewarded for recommending unsuitable, but more profitable products. But for the insurer, commission structures aren’t nirvana either. In some ways they can create a disconnect between how a sales force is rewarded, and how a claims department could traditional be viewed as “successful” – that is keeping costs down (and paying as few claims as possible is one way of doing that).

This is not to say that claims departments aren’t empathetic to claimants, or that they are eager to reject claims – but when performance targets are linked to the number of claims closed and healthy loss ratios, there is a clear incentive to make the claims process difficult. And this often makes the process adversarial.

 

A different, better model.

It was in part a desire not to incentivise sales that has brought new insurers like Integrity into the market. It seemed clear that the industry could benefit from competition in the form of a disruptor – one with a focus on being transparent, simple and fair – and that such a model could be financially viable for both sides of the transaction.

It was here that technology played an important role in keeping the process simple and costs low. With the benefit of technology, insurers like Integrity, have been able to create more simple application processes which reduces the number of questions by only asking for the information necessary.

Two of the biggest challenges associated with life insurance is that death and disability isn’t anyone’s favourite topic, and that putting a price on a life is a difficult process. However, if you take the view that a simple financial settlement shouldn’t be the only thing an insurer offers, then the focus becomes support and outcomes as opposed to money. The reality is that most people who suffer a serious illness or accident, or have a family member die early, have never before dealt with such an event. They often have no experience with the hospital system, have never organised a funeral, and are unsure of what is required, and how to do it. An insurer can not only provide finance, but can also provide emotional and logistical support too.

This requires a personal relationship with the insured, one which is not adversarial but which seeks to support. If both insured and insurer are transparent and fair from the beginning, the outcomes are far more likely to be better for both parties. We all know that a good dose of prevention is better than trying to find a cure, and that better outcomes result from early support and intervention. This can’t just be support to the claimant – it also means a close relationship with employers, medical professionals and other service providers as well. Because good relationships mean that when a problem with an employee is identified, even if it appears to be a relatively minor problem, the insurer can reach out early, and offer support before events spiral out of control. Without strong relationships, or if the relationship is adversarial, claimants are less likely to work with the insurer to find win-win solutions – which means everyone loses.

Another factor to bear in mind is that some clients have more challenges than others when it comes to accessing medical and other services. In regional areas, such services can be few and far between, and navigating the health system can be challenging. In a traditional claims process which reacts only when the claim has been lodged, small and potentially resolvable problem can become big, challenging problems by the time they are dealt with. A more flexible claims process which begins as soon as a problem is identified, before a claim is lodged, and which takes into account a client’s specific circumstances can help clients to better navigate the challenges they face.

Ultimately, it is the claims experience which determines whether an insurer’s reputation thrives or dies and a simple, transparent and fair claims process is one way to help demonstrate the value of life and income insurance and rebuild trust in the industry.

Don Stevenson

Don Stevenson

Head of Claims

COVID-19 and Underwriting – additional questions branch.

COVID-19 and Underwriting – additional questions branch.

Across Australia, drastic measures are being taken to control the spread of COVID-19. Numerous clusters have developed, particularly in VIC and NSW, and with a large spike in confirmed cases, community transmission is now a reality.

Despite the additional risk, we continue to apply our usual common-sense approach to underwriting with the addition of some more specific questions on COVID-19 to evolve with the situation.

What’s changed?

For the vast majority of applications, there will be no change. If your client has not been affected by the virus, it will still be possible to complete a case with straight through processing, just as it is with many other disclosures. 

For those applicants who have been impacted by the COVID-19 virus pandemic, we will continue to apply our overarching underwriting philosophy using a fact based, common sense and research driven approach. They may be asked additional questions based on the information they provide.

Being there when you need us most.

From the onset of COVID-19, Integrity has maintained no blanket exclusions or restrictions on applications.

As a signatory to the FSC COVID-19 initiative, we believe in protecting the people who are protecting us.  That’s why we’ve supported expanding the definition of “Frontline workers” to include; All hospital workers, ambulance workers and paramedics, people who work at a GP surgery or clinic, workers at COVID-19 testing sites, people providing mental healthcare services, workers developing a COVID-19 vaccine or treatment, pharmacists, police, aged care workers, and volunteers helping to support people with COVID-19.

What if I have additional questions?

We know it’s an extraordinary time to be working in this industry, so our entire team is available to help support you. If you have questions for our Chief Underwriter, Chief Actuary, Head of Claims or our Rules Engine Manager, we’re happy to get you in direct contact with them, just get in touch.

Integrity Life

Integrity Life

From the newsroom

A ‘new mindset’ for advisers in a post-pandemic future.

A ‘new mindset’ for advisers in a post-pandemic future.

The world has irreversibly changed, and we’re not done yet. However, if we look at broad consumer trends and understand how they can be applied to our industry we can better navigate the disruption and evolve – for the better.

We looked at consumer reports from McKinsey, KPMG, and The World Economic Forum and identified some similar trends across the board.

 

Customers want Australian businesses to get back to basics – but with modern delivery.

When Australian consumers talk about basics, they’re talking about values. Values like trust, transparency, loyalty and security. These were consistently raised by customers across Financial Services according to a KPMG report* on customer experience expectations. One of the biggest shifts was in the demand for ‘Integrity’ (we’re not making this up!) where consumers are seeking increased transparency in terms of communication especially where fees are concerned. You can understand in times of uncertainty, people want to know where they stand. Open and honest communication, as well as anticipating customers’ questions and needs (before they have to get on the phone and ask) will not be something that goes away.

While ‘the basics’ are actually code for ‘values-based customer-centric decisions and approaches’, one other area that is permanently transforming is how the basics are delivered.

A recent report by BT Global Services showed that two-thirds of customers want to be able to use video chat to discuss a financial service product with an Adviser and 61% are interested in using video chat to discuss the renewal of an insurance policy or claim^.

 

Find ways to make digital more human.

While we are craving connection and a more human experience, we need to find a way to deliver this via digital channels. As mentioned, video chat is proving a very effective tool to support efficient connectivity and the smart companies are investing in training their people how to deliver warmth and professionalism via Zoom. But there are other ways.

One thing good marketers do is understand the world their customer inhabit. Examples of this are setting up Google Alerts on keywords that could be client’s businesses, their home suburbs, their favorite pastimes – why? So you can either be on the front-foot with news that changes their world (and perhaps insurance needs) or be better informed when you speak to them.

 

How to deliver more, with less.

Something has to give. You still only have 24 hours in a day – and some of those you need to sleep. The best place to find those extra hours is through digital transformation with a focus on operational efficiency. We have written a lot about this (see below) but never has this been more critical to delivering on consumer expectations in this new world we’re all living in.

 

Additional content on operational efficiency.

Sources

Integrity Life

Integrity Life

From the newsroom

The future of life and insurance in Australia: Adviser workbook.

The future of life and insurance in Australia: Adviser workbook.

When we published our research paper on the future earlier this year, we had no idea how quickly everything would change as a result of COVID-19. But the truth is, the trends we predicted continue to influence our industry unabated. In many cases COVID-19 has, in fact, just accelerated change. Here we outline what these broad trends mean for you – the Advice industry, and we unpack what you can do now to make the most of the change and not get left behind. If there is one thing that is always true it’s that change in inevitable.

 

Trend 1: Client engagement and advice delivery will align to evolving demographics and needs.

To date, most of your clients have probably been baby boomers. Now gen X, Y and Gen Z are likely to become the predominant forces within consumer markets. These generations grew up with the internet and have different expectations. COVID-19 has actually accelerated these preferences and embedded them as part of BAU. So, here’s your checklist…

  1. Do you have video conferencing? And do you know how to present online?
  2. Do you know how to leverage personalised data to create a bespoke pitch to your potential client?
  3. What options do you have for new business to get in touch or renew? Chat, email, phone, Calendly, a variety of social media channels?
  4. What is your social media presence like? Are you engaging fans and followers and building an online reputation?
  5. What happens when price and product aren’t the only considerations? How will you manage clients who are interested in understanding the ethics of all companies you are recommending?
  6. What do you stand for? We are in an era of social movements like #metoo and #blacklivesmatter – your stance on social issues may come into play… is your business carbon neutral (for example).  

Trend 2: The market will fracture as new client-centric business models emerge.

In order to continue to justify commissions or even a fee for services, Advisers will need to demonstrate the value of their advice and the bespoke personalisation of it. You can’t provide personalised advice without an in-depth understanding of your client and their goals. So how do you do this while still maintaining a margin through a discovery or ‘getting to know you’ phase? Here are some things to think about…

  1. How automated are your questionnaires and on-boarding processes? Can you connect via an Application Programming Interface (API) to other sources to create unique offerings and easy applications? Eg: Facebook, LinkedIn, health records.
  2. Have you got a one-size-fits-all approach to customer engagement? Or do you have packages based on understanding key requirements of segmented audiences and customers?

Trend 3: Fee transparency and versatility will be vital for fostering client trust.

Commission or not, clients want transparency. Not only in the price they’re paying and why, but also what the Adviser is being paid – and why…

  1. Do you have a flexible fee structure or are you completely reliant on commissions? Are you charging for time or expertise? And, can you clearly articulate the value you add?
  2. How do you demonstrate ongoing value for money? And how do you ensure you have ‘clients for life’.

Trend 4: Artificial Intelligence (AI) and other emerging technologies will enable advisers to deliver advice and insurance more effectively.

  1. What does your business look like when all the number crunching, cost-saving and goal planning recommendations are so quick and easy you can no longer charge purely for them?
  2. What opportunities does AI give you to create even more bespoke offerings?
  3. Do you have a robust technology backbone with an API so you can securely ‘plug and play’ with other companies to create new offerings?

Trend 5: The emergence of ‘new age’ advisers will see an inter-generational adviser workforce share skills, knowledge and experience.

  1. What is the diversity of ages, backgrounds and skills across your business like? Or how do you tap into diversity within the community?  
  2. What do you and your brand stand for? Do you have purpose beyond profit?
  3. How does your business share ideas and promote innovation?
Integrity Life

Integrity Life

From the newsroom

How do we talk about life insurance now?

How do we talk about life insurance now?

One of the questions we’ve been asked by a lot of Advisers is, how do we talk about life insurance now? Has it changed as a result of COVID-19?

Well, yes. Significantly.

The role of Life Insurance hasn’t changed but many people are finding it much easier to imagine a world where they need it. The reality of the bushfires (which claimed 26 lives) and COVID-19 (which is at 102 and counting) may be easy to dismiss statistically, but the media focus should at least get more people thinking about the possibility of tragedy happening to them. All too often, the GoFundMe cases could have been avoided if they had planned ahead.

But here’s where we do need to do more education and Insurers have a role to play. Life Insurance isn’t just about protecting your life, it’s also about protecting your lifestyle. Despite 1.6 million Australians losing their income as a result of COVID-19 (according to the ABS) many people are still unaware of the range of insurance products that protect you for job loss, or job loss as a result of injury or illness. For example, Income Insurance can protect you if you were unable to work due to illness or injury. Recovering from a loss of income while also having additional medical bills would be terrible for your average Australian, who’s household debt is around 200% of income. In fact, we have the highest household debt of any country in the world.

Clients now know the importance of being prepared.

The key point you should discuss with clients around life insurance is: We now know firsthand how scary it is to not be prepared. When COVID-19 hit and you couldn’t get the food supplies you needed, or toilet paper, or see loved ones. When you couldn’t travel, or have freedom of movement, and were confined to one space. How did that make you feel? When you didn’t have the resources to comfort your family, to protect them. What was that like?

Being confined, being restricted, being limited in choice, not having the right resources. These are not things limited to COVID-19. Ask anyone who has had to deal with the loss of loved one, or care for someone permanently disabled, and they will be able to tell you about all these things.

These are the conversations we need to have with clients. This is how we’re going to be able to protect them.

Time to think.

The other poignant consequence of COVID-19 is that the time we have spent at home has given many of us a lot of time to think about what truly matters. The things that we value and want to protect are much more in focus now than ever before. And if nothing else, that’s at least worth having a conversation about.   

Emilie Chell

Emilie Chell

General Manager, Marketing & Customer Experience

Ever wish that life insurance products worked better in practice? Us too!

Emerging Trends – The Adviser of the Future.

Emerging Trends – The Adviser of the Future.

Two common models in business, which can be seen across the Financial Advice market are the volume-based business and the value-based business.

The volume business focuses on getting lots of clients through the door who have fairly simple requirements, it’s a low-touch model but relies on efficiency of processes and fairly straightforward clients who don’t have complicated needs.

The value business model is one where much fewer clients are served more holistically and the Adviser provides much more nuanced and bespoke service. They may specialize in a particular area of advice (or occupations) and they will generally stay with the client for life. Serving their needs as they change over time.

 

Can these models survive?

With changes to commissions and much higher compliance requirements, both models are under threat. The volume model isn’t satisfying customer needs and the value model isn’t bringing in a sustainable amount of business. So, what should an Adviser do?

The key to the future is developing a hybrid that adapts to rapid change.

Characteristics of this business model include;

  • Taking advantage of operational efficiency without diminishing your offering
  • Leveraging technology to deliver personalized and bespoke customer service that is indistinguishable from the high-touch model
  • Identifying opportunities to carve out market-share and seek out customers with modern marketing approaches
  • Building reputation and profile online via search, social media and web-presence
  • Investing in on-going training and education for all staff

Like a phoenix from the ashes.

Last year when our industry faced hit after hit, some among us wondered what the future, if anything, would look like. The new hybrid model is already bringing huge success to the Advisers who are embracing it and we’re delighted to be supporting them in this transformational change. The truth is, at the heart of this strategy is a focus on customers, and when you do that – you can’t go wrong. 

Suzie Brown

Suzie Brown

General Manager Distribution

Ever wish that life insurance products worked better in practice? Us too!