Putting a dollar value on your life is a daunting experience.
How should you broach the topic and go about taking out life, health, income protection and trauma insurance?
Russell Hutchinson, the director of Quality Product Research and Chatswood Consulting Limited, shares his thoughts on understanding the market, navigating the minefield of policies on offer, making the most of online insurance tools, getting the best from your advisor and making sure your insurer can’t decline your claim.
What does the market look like?
Hutchinson says there’s a greater variety of products available than ever before.
Banks are selling more insurance, and it’s become increasingly easy to side-step brokers and advisors and buy insurance direct.
While having more options makes the prospect of buying insurance more confusing, it also means consumers can get a product that best fits their needs and budget.
Furthermore, Hutchinson says consumers’ rights have been reinforced through the Financial Advisors Act and long-run changes in consumer law that are aimed at ensuring consumers receive better advice and can access improved complaints bodies.
How do you work out which types of insurance you need?
Hutchinson says there’s no substitute for being a good shopper.
He suggests people treat insurance as they do any other type of product they may buy, by figuring out what they need, acknowledging their budget and doing their research.
He says it’s a good idea to tap into the online tools and calculators available to better understand the types of cover available, before approaching an advisor.
This way you can get the best out of your advisor, without wasting time covering the basics.
Nonetheless, Hutchinson warns it’s important to recognise that advisors have their own agendas, or sets of insurance they can sell. For example, you can’t expect to buy a BMW from a Honda dealership.
He observes most people still use advisors to buy their insurance, as the process can be complex.
Hutchinson says you should only buy insurance direct online if you’re absolutely sure of what you want, or you have fairly simple needs.
How has the way insurance is sold online changed over the last few years?
Hutchinson acknowledges there are trends when it comes to insurance.
When insurance first started being sold online, it was all about comparing prices to get the cheapest offer.
The approach targeted people who already had insurance and understood their needs, but were concerned about price – especially as their policies came up for renewal. It was also seen as a solution for people who didn’t have insurance, and were after something quite simple.
Hutchinson says now there’s a greater focus on giving customers more advice and information about the quality of the product, as sometimes direct products can have narrow cover.
He says consumers are also becoming savvier about the ways they’re using online tools.
What are the most common problems people encounter when making insurance claims?
Hutchinson says the most common complaint he hears stems from issues around disclosure – insurers refusing to settle claims on the grounds that their customers didn’t disclose what was required when they took out policies.
For this reason he says you should veer on the side of caution when answering questions during the application process.
He says you’d be better off providing too much information or information you may deem irrelevant, than have your claims denied for not disclosing something further down the track.
He points out the game isn’t to get the cover in the first place, but to make sure your insurer cover you when you need it.
Hutchinson says people need to have a clear understanding about what they’re covered for, and how much premium costs may change over time.