Many people find the life insurance claims process daunting. With its complex procedures and potential delays, it’s easy to assume that the chances of success are slim. However, the reality is far more positive, particularly when a financial adviser is involved.

In this article, we’ll explore why adviser-assisted life insurance claims have a higher approval rate and the value of having an expert guide you through the process.

Contrary to common perceptions, life insurance claims are often paid out successfully. According to studies by ASIC and APRA, over 90% of life insurance claims are approved. Between 2016 and 2021, the claims payout rate ranged from 92% to 94%, showcasing the industry’s commitment to honoring claims.

However, these success rates can vary depending on the type of insurance. Life Insurance and Income Protection claims tend to have higher payout rates compared to TPD (Total and Permanent Disability) and Trauma claims.

Adviser-assisted policies are more likely to be approved for claims

While most claims are paid out, the method by which the policy is purchased can significantly impact the success of a claim.

A key finding from the latest data (2023) by APRA shows that advised life insurance policies have much higher claim approval rates than policies bought directly by consumers.

Here’s a breakdown of the claims acceptance rates by coverage type and distribution channel in December 2023:

• Death cover: 97% advised vs. 91% non-advised
• TPD cover: 83% advised vs. 78% non-advised
• Trauma cover: 87% advised vs. 83% non-advised
• DII (Disability Income Insurance): 95% advised vs. 88% non-advised

Why Do Advised Policies Perform Better?

Several factors contribute to the higher success rates of adviser-assisted policies:

1. 
   

   Thorough Underwriting: Policies arranged through advisers undergo a more detailed underwriting process, ensuring that coverage aligns with the client’s needs. This reduces the risk of disputes or misunderstandings when it comes time to make a claim.

2. Tailored Coverage: Financial advisers assess individual needs and recommend policies that offer the right level of protection, helping to avoid gaps in coverage that might lead to claim denials.

3. Expert Knowledge: Advisers are well-versed in the specifics of insurance policies, including exclusions and conditions. This understanding empowers clients to make informed decisions and helps prevent errors that could result in claim rejections.

4. Advocacy During the Claims Process: Should a claim arise, an adviser can assist with the submission, ensuring that all required documentation is provided and that the claim is processed as quickly as possible. This hands-on support can significantly reduce delays.

Direct Life Insurance Policies

On the other hand, policies purchased directly—often without underwriting—are associated with lower claim acceptance rates. ASIC’s 2018 report highlighted that direct policies tend to have a higher rate of claim denials, primarily due to suboptimal telephone sales practices and poorly designed products.

Direct insurance often lacks the level of personalisation and detail found in policies arranged through an adviser. This means that when it’s time to make a claim, policyholders might face unexpected issues due to unclear coverage or misunderstandings about policy terms.

The Value of Professional Guidance

Engaging with an expert adviser offers several benefits:

• Personalised Policy Selection: Advisers assess individual risk profiles and recommend policies that provide appropriate coverage, reducing the likelihood of claim disputes.

• Comprehensive Understanding: Clients gain a better grasp of policy details, including exclusions and obligations, leading to more informed decisions and smoother claim processes.

• Advocacy During Claims: Advisers can assist in preparing and submitting claims, ensuring that all necessary documentation is provided, which can expedite approval and payment.

Get in Touch with SCM Insurance

SCM’s expert advisers are here to provide the guidance you need, ensuring your policies are correctly underwritten and claims are managed smoothly. If you’re looking to discuss your insurance options and secure the right coverage tailored to your unique circumstances, reach out to the SCM Insurance advisory team today. 

Nic Brian – Principal, SCM Insurance

SCM Insurance Pty Ltd is an Authorised Representatives of MBS Advice Licence Pty Ltd ABN 25 654 854 136 AFSL 536983. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.