The Impact of Covid-19 on Life Insurance (and it’s not what you think)

When households experience financial stress, life insurance is unfortunately one of the first expenses to go. However, the current Covid-19 health and economic crisis is prompting Australians to reassess their life insurance needs, and in many cases, increase their cover. Pride Advice’s David Slovinec explains.

Pride Advice is currently assisting 15 clients to lodge and manage their life insurance claims.

This month, we are on track to facilitate the payment of around a dozen claims, including over $400,000 in total and permanent disability (TPD) insurance entitlements, a $50,000 trauma claim and a small number of death and income protection (IP) claims.

It has been an exceptional month, although, in any given year, this business oversees the payment of around $6 million in claim entitlements to vulnerable clients and their families.

We are extremely proud of the comprehensive wealth protection advice we provide and our strong record of helping clients get their entitlements paid. However, it is hard to celebrate, because every claim paid represents a life prematurely lost or adversely impacted by illness, injury or accident.   

Unfortunately, it happens all too often.

In Australia, heart disease is the leading cause of death and is responsible for one death every 30 minutes.1

Every ten minutes, one Australian will have a heart attack, and every five minutes, one Australian develops diabetes.2

Around 18,000 women are diagnosed with breast cancer every year in this country3 and 15,000 Australians are diagnosed with bowel cancer.4

We hear statistics like this all the time, but Covid-19 has really brought home the fragility of life. The large, and growing, number of confirmed cases and the global death toll has reminded us that no one is immune.

It has also forced people to stay home, slow down and think about what really matters to them. At the top of the list for most is looking after their family, which means taking care of themselves. That involves staying fit and healthy, paying the bills and maintaining adequate life insurance.

Over the past few months, Pride Advice has experienced a spike in inquiries from new and existing clients about their life insurance arrangements.

People want to understand the type and level of cover they need or have, and what they are and are not covered for.

They want reassurance that their life insurance policy does not exclude claims arising from a pandemic.

The rising number of claims and payouts in Australia has also caused the cost of premiums to increase significantly, leading people to question whether they want to maintain cover at renewal time. People are seeking advice on how to manage rising insurance costs, including reviewing their insurance provider. We believe it is prudent for people to review their insurance needs on a regular basis, in the same way people review their mortgage arrangements to secure lower interest rates.

Commonly, upon reviewing their life insurance arrangements, people discover they are grossly underinsured and seek to increase their cover. This is often the case for those who have recently upgraded their home or only hold insurance through their industry superannuation fund.

Adding value at claim time

As an adviser, there is no more important or rewarding job than helping a client lodge a claim form and ensuring all entitlements are paid.

There is often a perception that financial advisers are most excited about helping people grow and manage their wealth. That is a big part of what we do, but wealth protection is the foundation of a sound financial plan. It maximises the probability of a client achieving their long-term goals and, ultimately, retiring with confidence.

By far and away, my biggest career highlights have been situations where I have handed a cheque to a desperate client or family member, after months of persevering to get a claim paid.

Just this month, I had the privilege of informing a client who had been involved in a serious accident that his $210,000 TPD claim had been accepted. This followed almost 12 months of back and forth with medical professionals and the insurer, during which time he had exhausted his savings and increased his debt.

The delay in getting this client’s entitlements paid was due in part to Covid-19. Gathering the necessary medical information from the public healthcare system during a global pandemic turned out to be extremely challenging. Mid-way through the process, his surgeon moved overseas and, after that, he never saw the same doctor more than twice.

It was quite a moment for both of us when I was finally able to deliver the good news.

This experience highlights the value of professional advice.

According to data from the Australian Prudential Regulation Authority (APRA), life insurance claims are more likely to get paid when a financial adviser is involved. Advised insurance has a higher payout ratio than direct insurance for death cover (39% v 32%), TPD (45% v 28%) and trauma cover (62% v 40%), based on APRA’s 2019 Life Insurance Claims and Disputes Report.

If you need help understanding the value of adequate life insurance or would like to have your insurance needs reviewed, please contact David Slovinec on (08) 8168 8450.

Dave Slovinec is a Risk Specialist at Pride Advice. He is contactable on dave.slovinec@prideadvice.com.au

  1. The Heart Foundation
  2. Diabetes Australia
  3. www.breastcancer.org.au  
  4. https://canceraustralia.gov.au/