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Ideal client outcomes

There seems to be a renewed amount of noise on what an ideal client outcome looks like. And to be frank, I haven’t seen or heard a definition of one that is clear, concise, and simple.

Tuesday, July 23rd 2019, 6:00AM 2 Comments

by Jon-Paul Hale

I enjoyed Russell’s article, and suggestion that a good client outcome, when talking about insurance, is one where the client does not need to rely on the policy, and they have no need to claim.

Frankly, I call this winning! A whole lot of hurt, trauma and pain so far avoided. Excellent!

But as we all know, it doesn’t always work like that.

One thing I have been astounded at is the number of claims I’ve had this year. There has been quite a jump compared to the usual traffic I’ve had in the past. It is potentially a reflection of the time and stability of my book to date.

Which, as an adviser is also a good thing. Not great that a client has had something happen, but good that they have the support they needed. And so far the plans we have made have worked as expected.

However, claims and industry chatter it raises the activity of reflection. And at the same time, the consideration of what is a good client outcome?

A few that have come through, really challenge the perspectives that have been expressed to me by advisers in the past.

” I focus on getting the trauma cover in place, not so concerned about the IP as a trauma claim is a more certain financial claim.”

When I reflect on a couple of claims I have had, both stroke claims, and potentially both permanent disability. One is and has been for a while, the other we will see with more time. The challenge I have with the trauma focus for both of these claims is the typical $3-500k of cover that a trauma-focused advised might have put in place, is going to fall short on the need. And the industry average for a trauma claim is about $100-140k, which is well short of the usual requirements.

Yes, there is the potential that the claimant won’t survive as long as the IP policy, however, I have another stroke claimant who has had two strokes in the last 15 years, one on my watch, and he’s back working full time with relatively minor impact on work capacity. And medical technology has come a long way in the last 20 years, as too, policy wordings.

And in this third example, a trauma claim would have been the better outcome, short term impact and long term reduction of financial pressure, with reduction of debt and debt servicing. I get that.

However, in the case of my other stroke claimants, the issue they have is they are young. They have 15-20 years of working life ahead of them, and $3-500k isn’t going to cut it. And the latest one about 18 months ago decided to drop the trauma cover they had due to premium pressure, yup, about that age.

The reality is most advisers would consider a trauma claim paid an ideal client outcome, and frankly, I would too.

However, the rub is, would there have been a better approach that would have resulted in a better outcome for the client?

And this is where I think we are going to see some noise about the advice we give, particularly around how we deliver it.

In advising to have trauma cover, did the adviser concerned give equal weight to educating the client on income protection and the balance of risk that the client situation has?

Ok, I get it for the riskier occupations, there isn’t an IP option, and for the more expensive ones, budget is limited.

However, this doesn’t take away from the responsibility of the adviser to educate their client on what the risks are, how they can be solved, and what it would cost.

And this, in my opinion, is the difference between sales and advice. It’s probably a good thing I’m not the regulator; I would probably be too harsh too...

At the same time, this is the change in approach insurance advisers are going to need to take on board. It is a different approach, and yes, it takes longer.

What I have learned from taking this approach, as I’m crap at traditional sales, I’m very much a consultative salesperson. Which is to say my approach is significantly more data-driven than the often-used rule of thumb,” You look like a million bucks, here’s your policy.”

Yes, I know many will take exception to that statement, while also understanding what I’m talking about.

Coming back to the’ could there have been a better outcome’ point above, as this is the question that both claimants complaining and the regulator investigating, are going to come up with.

And what I’m referring to with this; is while the trauma claim is being paid, did the client miss out on the opportunity for the income protection at the time of the application, and in the reviews since?

Yup, that’s a pretty wide canyon, if applied, that we have to manage. But is also one that is feasibly predictable with the noise and actions from the regulators and DRS services in the last 18 months, once the new laws and code are applied.

Someone commented to me in the last week that the standard Aussie SOA is over 60 pages, just to cover off all of the ‘what if’ crap that the regulator might tackle the license holder over.

I certainly hope we don’t end up there. As we learned with the original overcooked AFA disclosure, it doesn’t add to the client outcome; it takes more away from it.

But that’s Aussie, and they’re a bit crazy in this space at the moment, and our regulator while rattling the sabre seems to be more pragmatically focused on the prize and not the players. Though it is us the players that are in the firing line, shape up or ship out.

So what is an ideal insurance client outcome?

I can’t tell you, no one can.

But I would suggest it fits somewhere in the range of; no claim paid, because there wasn’t a need to claim, and a claim has been successfully paid, with the caveat of not having the client in a position, if they had better information from the adviser, they could have had a better claim, and bracketed with the claim was paid with a minimum of delay’s, stress, additional information, and disclosure issues.

And that my friends is one hell of a mouthful to make sure we have covered off. Because the expectations of us are from a position of personal expectation, not industry understanding.

My final thought, nature and scope limitation is not going to help here, as has been suggested because this is about the advice that is included in nature and scope, if it weren’t it wouldn’t be a problem.

Tags: Jon-Paul Hale

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Comments from our readers

On 23 July 2019 at 10:42 am Tash said:
If you want a world full of fuzzy thinking, of uncertainty of obligation and very broad liability, imposed at the subjective whim of an authority figure, keep this crazy concept of 'good client outcomes' alive.

The only measure of an adviser's liability for advice given should be for compliance with the law (i.e. given with due care, diligence and skill).

Insurance advisers cannot ensure 'good client outcome' any more than investment avisers can guarantee clients will get rich or that real estate agents can guarantee people will love living in their homes, or that teachers can create super brainy clildren out of every student.
On 24 July 2019 at 8:02 am JPHale said:
On many levels we agree, however, the good/ideal client outcomes is a term first used by the FMA. So it's not going to go away in a hurry.

First it was where is the harm and more recently it has been about the conduct and culture around the advice, and the desire to ensure good client outcomes.

We are learning as an industry ignoring something doesn't make it go away. We have seen change imposed while most were trying to ignore it, frankly, I don't expect that to change, the behaviour is ingrained.

What advisers are slow to wake up to is the reality that much of what was under the code in the present regime is now in the law with the new regime. Which raises the prospect that the measure on the advice isn't under FADC but a judicial process in the court system.

This becomes a test by public peers rather than a test by industry peers. The rules have changed.

When looking at a complaint the approach is what was the intended or ideal outcome for the client and what do they want from the complaint process. One of the first questions asked.

It then steps back through the process used to determine if there was a problem that needs to be answered for.

Advisers advising in the view today with no consideration for the claim, or the possible complaint from their advise, are operating on a short sighted basis that will get them in trouble long term.

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Last updated: 23 August 2019 8:51am

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