“The wrong thing” not to discuss insurance

by Rebecca Pike14 Dec 2018

Banks and insurance groups have been called out on their cross-selling and pushing of products during the Royal Commission. But one insurance provider is calling on brokers not to let that get in the way of informing customers of products they might really need in the future.

ALI Group offers loan and mortgage protection, which it said is different to many of the products which were mentioned in the hearings.

The Australian Securities and Investments Commission (ASIC) also released a review earlier this year which suggested people were being sold policies they did not want or understand, with data showing high cancellation rates and poor claim outcomes.

Listening to the hearings, CEO of ALI, Huy Truong, said he was “angry and disappointed” at what came out of them for both the reputation of the industry but also the individual customers affected.

He said, “I’m listening to this and I’m thinking a lot of our brokers are watching thinking, are the products ALI’s providing falling into the same category?”

Truong said it was important to remember the difference between aggressive sales to reach KPIs and informing customers about their options.

He said that while ALI does provide commission, it is not the broker’s main source of income and there are no targets to meet.

Truong also discussed other insurance group cultures where employees might be rewarded when fewer claims are paid out.

He said, “We want to make sure a genuine claim is paid. We don’t have a culture where people get paid bonuses if you pay less claims.

“Because that’s the wrong thing to do and if you don’t pay claims then the very reason, the thing that they’re proposing to provide to customers is not happening.

“If our payout ratio is below 40% we start to get nervous. We want our payout ratio to be in line with the fully underwritten life products offered by financial planners. So called junk insurance products reported in the media have a payout ratio far below ours.”

While some brokers may now be concerned about where the line is between pushing a product and informing a customer about the product, Truong said it was important to discuss it.

He said, “Not saying anything at all would be the wrong thing to do, because most of the clients who come and deal with brokers don’t have any other person talking to them about this risk or product, particularly first home buyers and those earning under $100k a year.

“The broker is the only person, professional finance person, in their lives willing to.

“So the first thing we say is make sure you continue to have the conversation, because no insurance for many people would be the worst outcome at all if they needed to make a claim.

“The broker’s role is largely there to inform and educate. Talk to them about what their plan B is. They’re taking out a loan that goes for 30 years.

“A lot can happen in 30 years. We all know people impacted by an illness or an accident. So it’s about asking caring questions, asking genuine questions.

“I’m arranging this loan for you for 30 years, say you lose your income for six months, how will you service your loan? For me that’s a responsible question to ask.”

Truong said many customers might think they are already covered, maybe by superannuation or their employer paying for insurance.

But he said that might not be enough, “If the customer says thanks for taking me through that but I’m fine, I have got a plan, that in my mind would be a cursory education.

“They’re not making an informed decision because in almost all cases most people in superannuation would have death cover, but no trauma or illness cover and certainly no unemployment cover.

“So if you’re the broker, you say I’m glad you have got the superannuation cover but do you really know what it covers? Let me grab the superannuation statement you supplied for your home loan application and you can check what cover it provides you.

“It’s not a hard sell or pushing, it’s just as your broker I really care about you and I want to make sure you make an informed decision. You might still not decide to take the product and that’s fine, but I’d hate for you to think you’re covered when you’re not.”