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Policy ownership, a simple concept?

It seems it's not. And given the time and dialogue, I need to name names on this issue.

Thursday, November 7th 2019, 8:16AM 1 Comment

by Jon-Paul Hale

Jon Paul Hale

I wrote in an earlier article that I had discovered a bank was systemically administering policies in a way that is both contrary to industry understanding and the law.

Frankly, a basic level five core paper, everyone is complaining about doing, outlines it really clearly.

The policy owner controls and is the beneficiary of the policy.

"The owner of a life insurance policy is the one who has the rights that are stipulated in the policy document. There can be more than one owner. The owner, or owners, also have the right to name a beneficiary, the right to surrender or cancel the policy and the right to transfer ownership. The owner is sometimes referred to as the policyholder.” – Strategi Tax and Ownership from their Life and Health Strand material.

"Any life, sickness or disability insurance proceeds must be paid to the owner, or owners, of a policy unless other contractual arrangements are made.” – Strategi Tax and Ownership from their Life and Health Strand material.

Additionally, when I read the policy documents I have for ANZ policies this statement in the policy document also makes it very clear.

"Policy ownership

The policy owner is specified in the policy schedule. In general, the policy owner controls the policy. The proceeds of any benefit will be paid to the policy owner. There is a memorandum of transfer at the back of this policy document if the policy owner requires a change of policy ownership.” – ANZ and National Bank policy documents, standard policy wording definitions.

So when I get the following from ANZ on how they are approaching the management of policies, I'm not so happy or comfortable that anyone is listening.

"I can also confirm that for policies where the life insured and policy owner are different, all living benefits are payable to the life insured and a sum insured would only be payable to the policy owner if the life insured were not alive to receive it ie in the case of a death claim.” – ANZ Policy Administration Manager.

I have responded to this and given them sufficient time to provide even a basic reply. All I have is silence. So it is time to raise this issue publicly as there is more significant harm in having it remain as it is.

And while a good number of claims will be to households where the life assured and policy owner live together, there are still plenty of examples where this isn't the case.

And many will be under the impression that they own the policy, due to the way ANZ communicate with their policy owners, to the life assured.

It is very common for bank policies, where only one owner can be stated, for these to be cross-owned. So the Mr owns Mrs' policy, and Mrs owns Mr's policy.

Which on the face of it is okay. Until it is not.

Take, for example, a separation. Based on the information provided by ANZ there is nothing to suggest that the policy is otherwise owned than by the life assured.

All the communications are to the life assured, and when asked directly, all you get back from ANZ is a copy of the latest renewal letter addressed to the life assured.

Post settlement of a separation the life assured is left under the impression that they own their own policy. Their lawyer would think so too, they have had nothing to suggest the life assured doesn't own the policy either.

The only way to be really clear is to review the original application, which isn't always that easy to get your hands on, as it requires a medical disclosure release rather than a standard policy information release. This additional level of disclosure is not something a lawyer, and your average adviser, gets as it's not needed for basic policy admin, which this is.

The second piece to this, which is a little less horrifying, but none the less is somewhat frustrating, is the "new" process for policy ownership at ANZ, which is:

"The process of assigning ownership at the time of application has changed since the sale of this product. Whilst we cannot go back and change the way this particular policy was set up, I can confirm that on our on-sale product customers cannot assign ownership to another party at the time of application, they can only do so after the policy is in force and the current memorandum of transfer form clearly indicates that there is an option for two policy owners.” – ANZ Policy Administration Manager.

Which is to say, the real structure of the policy is only able to be achieved once the policy is in place. And is dependent on both ANZ following it up and the clients engaging in that change.

Helpful in that the life assured is the policy owner and this solves the initial issue I raised about communication to the life assured and not the policy owner.

On that policy administration, there has been some improvement. ANZ is reviewing what it has done in the past to rectify this going forward.

However, too little, far too slowly. This is a significant issue that will be impacting people right now. And right now being a particularly stressful time of life, as there is a claim to be paid.

Thinking about the potential situations this is going wrong in; the one that springs to mind as horrifying me the most is in situations of domestic violence, where a policy claim is potentially being paid to a past abuser where the policy ownership doesn't reflect the expectation. More likely in a death claim as the living claim is likely paid to the abused. Though even then that's still the wrong answer by law.

Did I use that example to inflame this? Yes, because this issue is that serious.

Lastly, ANZ has been silent about the original issue I raised where the life assured can update and change communication details on the policy; address, email and phone number.

Again this speaks to the policy ownership issue, but is subtly different as this is about the admin system and the way ANZ manages this with the client profile. The policy is listed in the banking profile, and the customer care line can update this directly with a call from the life assured.

Again potentially circumventing the release of information to the policy owner. I also suspect the policy isn't listed on ANZ's system for the policy owner, though this I have not been able to confirm.

ANZ, you need to do better than this.

Tags: ANZ Jon-Paul Hale Life insurance Opinion

« As confusion reigns and opinions are strong, is it all a bit much? My wildly unhelpful prediction … »

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Comments from our readers

On 22 November 2019 at 7:49 pm Chatterbox said:
JPH says - I had discovered a bank was systemically administering policies in a way that is both contrary to industry understanding and the law.

You ain't seen nothintg yet Jon-Paul. Practices contrary to the law are operating all over the place in the banking and insurance related sector. Most of which go unreported to the FMA due to self-reporting models.

Consider for one, memorandum of transfers assigning to a third party lender are actioned in equity assigning to an estate trust while the insurer is busy issuing different versions with the same name over time, that are passed off as being the same or a replacement of the original or a upgraded version. Now we have say over that many years a range of different versions with the same policy number and a trustee who has no idea what contract they hold or what the real terms and conditions are. This is not just unlawful its plan dishonest as version upon version tends to introduce new weasel terms to provide more discretion as to integrity of policy claiming status. Makes Winston's Foundation with the same name as NZ First look like childs play, yet even then no one knew whether their money was going into which "version".

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