Non-disclosure drama – Tips on the broker’s role to ensure a better outcome at claim stage
In the midst of a raging social media war, journalists writing about the pros and cons of the final outcome (or is it?) and PR companies using the Momentum case as “lessons learnt” exercise, it’s important, although difficult, to set aside the opinions and re-focus on the basics of the insurance industry’s processes.
A comment by a member of the public and a tweet by RiskAfrica emphasise the role of the broker:
“The take away from this is that IFA’s (sic) and clients need to make full disclosure even if it does not seem material at the time.”
“The #Momentum saga should remind us just how important it is to have brokers that can unpack insurance terminology for clients and explain the ramifications of withholding info on pre-existing conditions!”
How do you as broker measure against these factors? Do you just gloss over the fine print to make the sale or do you spend quality time with your client to ensure that the client understands his needs and that the product you recommend is the best solution to address those needs? Do you explain the risks of non-disclosure to your client? These are just some of the basic stipulations as per the General Code of Conduct, the Fit and Proper Requirements and Treating Customers Fairly principles.
ASISA’s medical underwriting standing committee convener, Dr Maritha van der Walt, recently stressed the importance of clients disclosing all vital information during the application process. “Problems at claim stage can be completely avoided with full disclosure of all the required information when you take out a policy”, she remarked.
According to ASISA, South African life insurers paid 99.3% of all claims against fully underwritten life policies last year. Half of the claims that were declined were due to non-disclosure. In terms of numbers, this meant that while 34 100 death claims were paid, 120 families did not receive death cover worth close to R160 million, because the policyholder did not disclose material information about a medical or lifestyle condition in an attempt to secure cover, or avoid loaded premiums.
A broker’s role in this process is to assess the clients’ needs and objectives, explain the terms and conditions and gather all information to ensure the correct assessment of the clients’ risk. A short-term example is whether or not the client’s house has a thatched roof. This information needs to be obtained at the time of underwriting and not at claims stage.
In ASISA’s article, van der Walt concludes with tips to the client when applying for insurance. It is equally important for brokers to view these tips and identify the role they play in the recommended action.
| • | Ask the client to complete the health questionnaire and assist where necessary |
| • | Explain to the client the necessity of providing detailed information |
| • | Mention to the client that even if the medical condition does not exist anymore, he or she needs to declare it |
| • | Tell the client to be honest about their lifestyle habits i.e. smoking and dangerous recreational activities |
| • | Inform the client that if his or her occupation involves risky activities it needs to be declared |
| • | Advise the client that they need to inform the insurer if any medical condition or lifestyle habit change |
| • | Explain the different terminology to the client in plain language |
| • | Ensure that the client understands the extent of the cover, the key factors that affect the premium, the exclusions, the special terms and conditions, and all relevant aspects of the policy. |
I am sure we have not seen the end of this discussion. The revised outcome has raised even more questions on social media as well as in the financial services industry. What new standards have been created by this decision? What will the consequences be?
In the end, we need to comply with the expectations of clients and create an industry worthy of the trust of its clients.
Click here to read the ASISA media release titled “Honesty upfront ensures hassle-free insurance claims”.
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