We have all seen the advertisements which show how much our insurance companies care about us. RACQ likes to show there is always a claim person on hand as soon as a disaster hurricane strikes. Or maybe AAMI, which is always beside the car, ready to pick you up the moment a tire comes off.
We all think that when times are bad, the premiums we have paid our insurance companies without fail and on time will be repaid back with equal loyalty.
But we often forget that insurance companies are not there for policyholders. There are there for shareholders.
Insurance companies’ business model is to collect premiums from policyholders and to restrict the payment of claims. In other words, premiums are good, and claims are bad.
So, when claims are made, insurance companies will often try to wriggle their way out of payment. If payment is due, they will then try to delay as much as possible because, as we all know, if you can make a payment in 2 months’ time, why bother making the payment today?
And often, we think that our financial planners will help. The ethical ones will. The rest of them will not.
Readers of my blog will know my story. In early 2022, I had a major heart attack. It required emergency surgery, 3 days in Intensive Care followed by a further 8 days in hospital. It was not something you could argue. It was straightforward. It was what I would call obvious.
I made a claim under my Trauma insurance, which I have held for 15 years, organised by my then-financial planner. My insurance company’s view was they needed more details from my cardiologist, which made sense. So, he told them the obvious in a full report. But then they asked for something else. Once given, they wanted something else. And when that was given, they again wanted something else.
By this time, 6 months had passed.
My Financial Planner? Well, apparently, they were quite happy to take the initial premium when the policy was taken out and continued to take the trail premium for 15 years, but according to them, as I had not signed a bit of paper, I was no longer a client, so they could do nothing. But they were quite happy to take the trial premium while I was no longer a client.
In the end, I had to write a demeaning letter to the insurance company saying they employed incompetent staff who were incapable of reading an ECG report. I had to spell out to them what my ECG report said and how it proved it was a heart attack. I then told them that if I was not paid with 21 days, I would take the matter to the ombudsman. Miraculously, within 14 days, they had all the information they wanted, and my claim was paid.
But I am one of the lucky ones who was fine without the payment. But what if my family or I really needed the money? Well, tough luck would be the insurance company’s response.
But if you think this is bad, I have a client in the middle of a life insurance claim who has been waiting for 18 months with no end in sight. It’s not a small claim, either. It’s over $1m.
Now, you would think a death claim is easy. It cannot exactly be something to be argued with. Once a person has died, it’s a fact.
Well, not really when it comes to insurance. Because the claim related to my client’s wife, who unfortunately drowned whilst in the bath. This meant there was an official investigation, so the first death certificate was not ‘clean’.
Once the police had done their checks, a second ‘clean’ death certificate was signed and sent to the coroner to sign off. It seems the coroner is in no rush to sign off and although the insurance company has the second death certificate, they have decided it must be signed off by a coroner. And without this, the insurance company will not release funds even though it has acknowledged the claim is true, even if it was suicide or something more sinister. As I said, why pay now when you can pay later.
The result is that 18 months have gone and a payout of $1m is sitting in limbo land.
The reason I have written this blog is so that you are all aware that just because you have a valid claim, it does not mean it will be paid swiftly. And that may mean that if you or your family rely on these payouts for survival – to pay the mortgage, day-to-day living, and school fees- then you may need an alternative plan.
The way that I explain this to clients is that you need at least 6 months of finance available so that in the event that the breadwinner cannot earn income, their day-to-day expenses can still be paid even if the insurance company does not pay your claim swiftly.