Beware The Direct Insurer!


Unless you have been living under a rock for the last year or so you would be aware that momentum is starting to build in the risk insurance space.

Whether you have insurance or not, very few of you can deny the value or importance of financially protecting both yourselves & your family.

As important as it is, it has been found that only a small percentage of our population have adequate cover in place to financially protect against serious illness, injury or premature death.

The reluctancy for Australians to adequately protect themselves through personal insurance has created a huge market in the risk insurance space!

For any of you who have recently taken a sick day it’s almost impossible to watch TV without a life insurance advertisement coming on.

It’s bad enough that we have to be exposed to the horrors of such shows as ‘Ellen’ or ‘Oprah’ while we are recovering let alone tacky life insurance ads!

The bulk of these ads are created by the direct insurance providers who promote the process of quick & easy insurance.

Given the duration & timing of these ads it’s fair to say that the homemaker is the target market that the message is being sent to.

There would be very few if any consumers out there that are able to differentiate between the products offered through the direct channel compared with the advised channel.

Unfortunately more & more people each day are organising their cover directly with minimal or no advice given.  This means that there is a very good chance that the cover obtained is not suitable or adequate for your personal needs!

It is vital that proper assistance is sought through a qualified adviser to ensure that both the type & level of cover is right for you.

Direct insurance is always promoted as being a quick & easy process & something that can be done over the phone by answering a few easy questions.  This process is possible due to either minimal or no medical underwriting being undertaken.

That’s a good thing right?  Well no it isn’t!  Without proper medical underwriting there needs to be a one size fits all solution in relation to the products offered.

The problem of course is that everyone is different so chances are the cover is not appropriate or suitable for your personal circumstances!

For this reason only basic cover with limited options is available through the direct channel.  Any pre-existing illness or injury is also automatically excluded, irrespective of the severity of your condition.

Mental illness is also excluded for any claims going forward even though approximately 20% of all insurance claims in the industry relate to mental illness.

Convenience & speed have very little to do with the quality of the cover being offered!

The direct insurance market is still in it’s infancy when compared to the products offered through the advice channel.  This means that there have only been a small percentage of policy holders who have attempted to claim on their cover.

In time, more & more policy holders will eventually be wishing to claim on their cover through such events as serious illness, injury or premature death.

This is the business end of the policy & obviously the main reason why the cover was taken out in the first place.

Unfortunately as very little advice was given at application time & very few if any policy holders read the fine print in the product disclosure statement (PDS), a decent number of claims will be declined due to some of the points mentioned above.

Why wouldn’t you take your time & receive proper advice in relation to your options so that you better understand your cover?

Wouldn’t you want the option of at least discussing your medical history with the insurer, with the possibility of full cover being offered?

Wouldn’t you prefer to be underwritten at application time & NOT at claim time?

Wouldn’t you want an adviser to shop around for you & find the best cover & premium for you on the market?

Wouldn’t you prefer to have access to & speak with the same person each time you had a query or needed assistance?

If consumers are aware of this information when applying for direct insurance & are still happy to proceed, then all the best to them!

I do have a problem however when direct insurers purposely deceive or mis-direct consumers during the insurance process, as this experience also tends to taint the reputable insurers & advisers in the industry!



Tom George
My role as a Life Risk Adviser involves educating, assisting and providing advice in the area of personal insurance. Follow me on Twitter | Linked In Profile

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