Insurance and Social Security - Assignment Example

Insurance and Social Security Student’s Name Institution Affiliation Task 1- Overview of the Process with the Client (Neighbor - (Mason Smith) - 54 years) The first step in the process was to approach my neighbor (Mr. Mason Smith) to ask him to consider the different types of insurance (Life $700,000, TDP $200,000, Income protection $5,000 per month, Trauma protection $100,000) and their importance. We have been neighbors with Mr. Smith for about 15 years and hence establishing rapport with him was quite easy. However, it took time before he agreed to fill the form. During our first meeting, the client asked to be given time to consider whether he would complete the application. He took about 5 days reconsidering and on the fourth day, he called me up and asked to visit as he needed more information on insurance before he completed the form. I visited him the following day well prepared to convince him. I ensured that I had thorough knowledge and full understanding on the different policies. The knowledge of the products came in handy in convincing my client. Knowledge of other similar products also came in handy. To fully convince the client I crafted some questions such as How will your wife and kids support themselves without your income when you don’t have life insurance Will you benefit from the peace of mind which comes with the awareness that your family will not be burdened How will you’re your family support themselves in case you become completely disabled or unable to work or earn an income? The answers to these questions helped the client to understand the importance of the different policies and this worked to my advantage. The most important and challenging thing was helping and convincing the client understand the different policies . At last, she agreed to complete the form. From this, I learnt that most clients need, want, and truly appreciate simplifying the different insurance policies into something they can understand and make an informed and educated decision about. Secondly, I explained the duty of disclosure when applying for insurance. I urged him to try as much as possible to answer all the questions asked in the application form fully and offer truthful and complete answers. The next step entailed preparing for the interview. The client easily volunteered most details however he disclosed others especially those related to his health. Generally, the interview process went well although a few fields had to be left blank, as the client did not voluntarily volunteer information required. The client declined to indicate whether his family and immediate blood relations had suffered from the indicated conditions such as diabetes, uterine/bowel cancer, heart disease, stroke or high blood pressure and haemopholia among others. The client also indicated that he would not authorize MLC to collect additional medical requirements such as medicals and ECG. This was quite a challenge as such details are very important for insurance companies in determining the premiums. Details such as age, name, education, address, income, and employment details were readily provided. When it came to the medical history of the family, the client was a bit hesitant about some questions and also refused to respond to others. The client needed a basic understanding of the bad and good regarding the different insurance policy that they would own the options that were available for them as well as the right amount and the need to disclose some information related to health (CCH, 2011). I learned that such issues can be addressed by assisting the client to understand exactly what they would own- knowing the way Total and Permanent Disablement (TPD) insurance, life insurance, income protection and trauma protection work in general. The next step would entail improving the client understanding of what they own to determine the benefits and features of the policies that they would own and explaining the different kinds of life insurance and the way they work which is very important (Dionne, 2000). The client was also had doubt on whether the recommended amount of TPD insurance, life insurance, income protection and trauma protection work was the “right amount” of insurance. He had a different opinion on what the right amount should be. I resolved this issue by telling the client that the right insurance amount was as much as they could get. This was 15 times his annual income and it would be 10 times his income at the age of 70. There has been no such thing as having “too much” life insurance. The client was able to recognize that there was an insurance problem and the need and he was empowered and well educated to solve it. The major important challenge experienced while interviewing the client was the failure to disclose important details, which the insurance company will require to determine premium. Filling out the application form is supposed to be done accurately and accurately to make sure that the client will get the correct coverage and in order to ensure that there is no disagreement with the insurance company. In another case, I would try to get the client to disclose all such details by citing different cases where failure to disclose important details has led to non-payment or reduction of the sum that had been insured in line with the formula that considered the premium which would have been paid if the client disclosed all important matters. I would also urge the customers to research their health and background properly to ensure that they will manage to answer all the questions accurately and as fast as possible (Ricks, 2001). It is also important to go through every detail on the application form. For instance, explaining that the form requires a date of birth to determine the applicant’s age and hence help in measuring their life expectancy. The importance of ‘habits and lifestyle’ questions which help to determine if such habits have an effect on the applicant life expectancy. The insurance company usually considers such details when they agree a policy and in case they find the applicant to be dishonest, they may attempt to withhold payments. The client also needs time to consider the available options for a considerable amount of time. Documents also need to be availed showing the need for providing honest and accurate information in order to avoid future problems. Although some questions may be very sensitive, the applicant has to bear in mind the importance of insurance. The first step in advising the client should begin with knowing the client and establishing rapport with him/her. By doing this, the client can allow the adviser to conduct a thorough needs assessment of the family situation, lifestyle, objectives, goals, risk profile and financial circumstances. The more an adviser knows about the client, the more precise the recommendations are. This provides a framework against which the insurance plans can be evaluated by the client and adviser. Task 2 It is important for the insurance company to collect detailed information on insurance application form as the applications act as guiding documents for the insurers. As a result, they should be completed accurately and thoroughly as the information is used by the insurance companies to determine if they can issue a policy. The companies also use the information on health and family history to determine the premium, which should be charged. The application form is the most critical requirement for insurance contract functioning between the insurance company and the insured. Detailed information on insurance application forms is thus important to ensure that the insurance does not charge the incorrect premium amount. It is important to the insurer decision whether to accept the insured risk of insurance and if that the case, on what terms. Failure to disclose important information may cause the insurer to avoid the contract within three years of entering into it. Insurers may avoid the contract anytime in case a non-disclosure is fraudulent. An insurer may choose not to avoid a contract but instead reduce the sum, which is insured for in line with a formula that takes into consideration the premium, which would have been paid in case the insured had disclosed such relevant matters to the insurance company (Vamplew, 2003). To avoid this, it is important that the insured provide detailed information. The detailed information enables the underwriters to assess the risk factors of the applicant and to put him or her in the correct risk category (standard, substandard or rejected). All factors that adversely affect the lifespan of a client should be taken into account. The combined effect of all the risk factors indicated in the application form increase insurance risk. The basic information required to evaluate factors that increase risk is available to the underwriters from the application form. This comes in handy in designing a plan and ensures that there are no unanticipated gaps in insurance coverage and that the cover is adequate in case of a claim. This also enables the adviser to present recommendations in a compliant and clear format so that the insurer can make a confident and fully informed decision on the insured risk. Task 3 (Letter to the Client) FAIS Insurance Company (Insert name) O’rdian Street Mascot NSW + 61 1200 435 457 Mason Smith O’rdian Street Mascot NSW + 61 2 9330 3500 Dear Sir, As your insurance adviser, I will first embark on increasing your awareness of the importance of the Life insurance, Income protection insurance, Total and Permanent Disablement insurance, and Trauma protection insurance in order to convince you to fill the application form. I will provide you on relevant information regarding these policies and their importance and will assist you to work out what your needs are so that you can decide that the recommended insurance policies are right for you and your family. I will help you to combine the policies with each other and with your other insurance arrangements. When you are fully convinced, you will fill an application form for the insurance. You will receive various compliance documents such as the “Insurance application form” “disclosure document” (introduction letter to the client), “Appointment or client consent for information” “Client advice record and Needs analysis” “Information sheet with assets, liabilities (income and expenses) (Financial statements)”. In addition, “Client confirmation letter after concluding business” “Services level agreement between client and adviser” and “Id copy, proof of residential address, bank details, and income tax number”. The insurance application form will contain the details that the client will be required to provide to the insurance company, which will help in determining whether the company will approve the policy and in determining premiums (Kent, 2005). The letter of introduction will be my disclosure document stating my qualification and experience as your insurance adviser. The client consent for information document will be submitted to the adviser to show that you agreed to submit the information offered. The financial statements will be documents on the clients’ liabilities and assets. The client’s confirmation letter will indicate that the business deal between the client and the adviser is over. The service level agreement will formally define the services between the adviser and the client and will ensure that there is delivery of services. Documents such as Id copy, bank details, residential address proof and income tax number will ensure that the client details are correct (Henderson, 2011). This process will be important in providing you protection, as it will ensure that you get value for services received and transparency and professionalism is observed. Yours Sincerely (Insert Name) Task 4 In Case 220877, the financial services provider declined to pay Mr. B claim for damage of a motor car after an accident claiming that Mr. B failed to disclose that he has attained the maximum 12 penalty points. The Financial Ombudsman Service panel declared that an individual cannot disclose what they are not aware of. The panel was also not satisfied that the service provider discharged the burden of proof because Mr. B did not disclose that he has received the maximum demerit points allowed while renewing the policy. The Financial Services Provider’s (FSP) wished to deny the claim for the motor car damage after the accident as Mr. B did not disclose that he has reached the maximum allowable 12 penalty points. The applicant believed that they should have been paid, as he was not aware that had reached the maximum allowable 12 penalty points. In addition, he had not received any warning letter and the law of non-disclosure clearly states that an individual is not obliged to disclose what they do not know. He held both a New South Wales and Queensland license at the relevant times. Mr. B also received a message welcoming him back as a policyholder from the financial services provider during the course of the dispute. This raised the issue of whether this was a direct invitation to Mr. B or a marketing tool. Although this was not important to the panel decision making, it showed the risk which a financial service provider runs when on one hand it decides not to insure a person because of their particular driving history and on the other hand when it decides to send the person marketing material inviting them to re-insure. Mr. B should have been paid, as he was not aware that he had reached the maximum allowable points. The law of disclosure requires consumers to disclose all matter known to them that they know to be important to the insurance company resolution to accept the risk, or that a significant individual in the circumstances could be expected to know its importance to the company. Mr. B failed to disclose that he had reached 12 points as he was not aware and he had not been sent any warning letter. References CCH. (2011). Australian Superannuation Legislation. 15ed. CCH Australia. Dionne, G. (2000). Handbook of Insurance. Norwell: Kluwer Academic Publishers General Insurance Case Studies. Maximum Demerit Points-you cannot disclose what you do not know. Retrieved from http://fos.org.au/centric/home_page/cases/general_insurance_case_studies.jsp Kent, M. (2005). Current Issues In Insurance Law, Material Non-Disclosure: Proportionality, Good Faith And Reasonableness. Crown Office Chamber. Henderson, S. (2011). Financial Planning DIY Guide: Everything You Need to Successfully Manage your money and invest for wealth creation. Queensland: Wrightbooks. Ricks, N. (2001). Principles of Life Insurance Selling. Lincoln, NE: Writers Club Press. Vamplew, J. (2003).The Life Insured’s Duty To Disclose and the Consequences of Material Misrepresentation And Non-Disclosure. Whitelaw Twining. Read More