The New Normal for Income Protection #4 – Transcript

Fraser Jack
Hello, and welcome to this part four of our five part series on the new risk environment for income protection as we settle in to the changes from IDI I’m your host Fraser Jack. And in this episode, our panel discusses the human side of the changes from advisors and staff to claims teams and clients. These technical changes affect the humans involved after all, let’s dive into this episode. Like back to this episode, where we’re really talking about the the human side of the the products and the policies, we’ve just been a lot of time talking about the actual, the actual controls themselves within the policies. But I want to talk about some of the humans around from both the advisor point of view and the client point of view. Let’s start with the the idea of the risk specialist. Now we’ve got a couple of specialists on this particular panel. And then we’ve also got John who’s doing holistic type of advice. What’s the future going to hold? Tell us about what your thoughts are with specialist versus holistic advice and people trying to do holistic advice, John.

John Cachia
So I actually started in the game as a risk specialist. And I was actually suspicious for a long, long time. Actually, I’d done my call it back then my apprenticeship at a risk specialist place and I love risk, I always have always will when even Dolma goal based financial advisor. Risk is a big, big element of proper foreign financial advice is one of the key pillars of the foundations of proper plan. What I’m finding is that risk specialist both through legislation education, and simply what the requirements are now 2022 That transactional salesman 1990s kind of is nearly let’s call it dead. Yeah, let’s be honest, it used to be going there, get a quick fact fine, Sign him up, off you go. And it’s we’ve we’ve moved, you know, this is decades ago into where we are today. And today is a very thorough process, it is understanding not just the insurance need as per se it’s understanding the affordability, the cash flow implications, the superannuation ownership of insurance, yes, or ownership structures, it’s understanding eligible service dates, it’s understanding, in some cases, medical conditions and how they are implicated and you know, the psychology of some of this stuff as well, too. So, it to be a risk specialist, I believe you still need to know other areas, you still need to have a deep understanding of these other areas where maybe back in the day, that wasn’t necessarily the case, you could know risk. And that’s pretty much it. These days, if you don’t understand the implications of your risk advice and the flow on effects of that, you know, best interest duty will probably leave you out to dry. Yeah. And therefore, which is the next one in regards to kind of casual risk riders, it’s then the other side of things, if you’re doing investment planning, and that’s all you’ve been doing, and that’s your bread and butter, but you don’t understand the implications of getting the, you know, Risk Insurance done correctly, the flow on effects for that, and the once again being hang up to dry, hang out to dry in regards to best interest duty, you could find yourself in a very, very tricky position. And we’ve personally take it on that yes, I do goal based financial planning. That’s what we do. That’s what we’re known for. But I’m still that internal kind of go to for that risk specialist advice and teaming with talent internally. And then internally having specialists within the organization that the team can kind of go towards clients have particular questions that they can kind of refer to. And that’s where I think that they that the world of respect List is changing, I think to be honest with you, risk specialists that understand the indirects, who may be our financial advisors, but have now just constantly consciously made a decision to say, I’m not doing that I’m just knowing my stuff and doing it really well. I think they’ll actually survive and actually thrive with this. Because on the other side of the coin, what is there about 18,000 advisors, if I had to kind of take a little guesstimate out of there, I would say a small percentage of risk specialists who might be willing to refer to these risk specialists to kind of team up and I know, there’s a few people making a lot of good wins here. So I think the dynamic of the industry and the profession and where it’s heading, it’s the you know, your stuff team up and know your stuff. Or unfortunately, you got a question, are you Is this the profession? You want to stay around you?

Fraser Jack
Yes, definitely. Well, it definitely, you know, you mentioned the word casual risk writer there, I think that’s, that’s a part that we’re not going to see very much of when it comes to, you know, people have been able to work in and if I, if I go back to here, whereas in the past, you mentioned, the wrist right, I was it was a bit quicker, a bit easier. But there’s also a lot of people that could work in as a as a professional, but part time, which I think will will start to lose, what are your thoughts Cathy?

Cathy Kayess
I think the way that John talks about this structuring, that’s how I see it, you know, I work in a practice with another advisor, you know, his focus is mainly on investments. And as soon as risk comes in the door, it lands on my desk. Now we’ve got a massive book of insurance clients. So it is balanced between Can you have a risk best specialist who has enough work to do this on a full time basis? versus, you know, what is a casual risk writer? Is this someone who has some insurance clients and is reviewing one a month? Are they someone who’s got one a quarter? And at what point in time? Is it not time efficient, cost efficient, and in the clients best interest for that advisor to continually look after that insurance policy? So for me, you know, I’ve got no qualms that I’m safe in what I do, because I know what I’m doing in this space, and it’s the advisors who dabble in it that, you know, eventually are going to have to make a decision as to where they sit on the fence. They’re going to have to be in or they’re going to have to be out because it’s going to get too technical. To be able to try and, you know, have a foot in both camps. Really? Yeah, I

Fraser Jack
definitely think it’s already there. It’s already that sort of that technical space, isn’t it? They’re like you said, Don’t dabble. You’re either in or you’re out. And having that strong process in house for you. And philosophy that we mentioned previously, in the episode is really important. What are your thoughts? So in?

Serena West
For me, I began my career as a normal financial advisor, and then fell in love with risk and never looked back. So it’s all I’ve done probably for about the last 18 years. And I get referrals from lots of other financial advisors who just say, Oh, my God, I can’t do this. It’s too hard. I don’t want to talk about that stuff. I don’t want to know that stuff. How do you even remember all this stuff? And so I guess it’s what you gravitate to, you know, I don’t gravitate to investment work. So for me, I am booked out busy. Lots and lots of referrals, clients, people that all need my help. And I did consider, you know whether I actually still wanted to stay in the industry a little while ago, we think, you know, is this, does this still really light me up? And luckily, the answer was yes. But I also thought that people aren’t going to stop getting sick and dying, and people aren’t going to stop needing money. And so as much as all these changes are happening, it’s so so useful for people to have older people like me around who actually have an understanding of older products, or who have a network of people around that I can ask questions to. I never sit there thinking, Gosh, I know all the answers. I absolutely don’t. You know, there’s been many times where Jeff and I sit and chat on a Saturday because we’re both nerds. And we talk about cases where I’m like, How do I approach this, Jeff, what do I do to make sure that we’re getting the best outcome? And it’s such a detail field. It terrifies me when I see people dabble because the damage that they can do these enormous and you don’t know what you don’t know.

Dr. Jeff Scott
I have to support everything that’s been said by Serena, John and Kathy on this. Right now. It’s completely new paradigm with the wide differentiation in terms conditions on new income protection policies, from the first of October 2021 to the old stuff, and be able to compare what’s appropriate for the client what’s not appropriate understanding the pricing pressures. A casual risk writer on the basis the recommendation on price is unlikely to meet the best interest duty of their clients. Because again, as three dimension and John and Kathy have all mentioned, this is a highly specialized field. It’s a highly specialized profession. And no one person is going to have all the answers and effectively, that’s why I created the team at MetLife that I did was because I’ve created a risk specialist technical team, called vise strategy that allows people to if I was vice deranian, and answer those technical queries, and I think that for people who believe that they can do it by themselves, so people who believe that they can be a casual risk writer and geologists recommend insurance, I think they’re very misguided in that process.

Fraser Jack
Yeah, I can’t help notice. You mentioned the word shopping on price, in that in that grab, and that’s something that I think, you know, the general public have been conditioned to do so often when it comes to insurance. Now, I think, I love the saying that more than in the other commodity, when it comes to insurance, you get what you pay for, around that scenario of you know, like, you know, safety equipment and those sorts of things. Do you really, really, really want to shop on price? And I think advisors obviously spend a lot of time talking to their clients about that and understanding, you know, obviously, yes, there needs to fit into their, their cash flow and affordability. But John, what are your thoughts on conversations with clients around price?

John Cachia
Yeah, I think, I think just with price, it’s, it’s one of those ones that as probably a profession, we can obviously do better as well. And this is where the collaboration and a lot of friends be ex Wi Fi, FBI, whoever that is, and even working with government around educating about the extensive nature or the extensive work we go through to finding the most appropriate cover for them. And then I take it luck, because let’s be honest, I think we do that very poorly in regards to these. So, you know, from a client’s perspective, I think it’s calling up, you know, for car insurance or bringing up compare the market or whatever it’s going to be, and it’s just boom, boom, and then answers, they’re like, We really need to get better in articulating the value, the value in which we go through to find the most appropriate cover and the cover that we’ve spoken about here, which is creates the certainty that in the event of a claim they’re highly likely to claim. And then from there, we might be able to get some ground for synthesis and subtraction in regards to, you know, clients say, Well, what’s not just price, because this is the other big one that a lot of people are falling into. And I know when I first started on, it was just kind of try and get the client on my books, you move into back into that transactional space once again, 2022, that can’t happen, you’ll be pulled out to dry for that stuff. So definitely, just being focused on price has an implication on best interest duty, but as well, too. That’s that’s the problem. But then what’s the solution as well, I think, well, the solution comes financial literacy education around value, why do we do what we do? Like, you know, I’ve got two great advisors on here. And I know, they spent many, many, many hours, you know, going through stuff to try to calculate Kathy’s Excel spreadsheet that she did in regards to just comparing the covers, you know, I’m thinking about coming over to the UK to do my risk protection just to do a review. But the reality is, is that’s what we need the consumers to say, because it’s that that I would as a consumer, so look at the look at the value, she’s making sure that, well, they’re looking making sure that no rocks being left unturned.

Cathy Kayess
And I think on that, like, I’ve started explaining to clients that each client is a jigsaw puzzle, right. And every single jigsaw puzzle I do is different. But I need to make sure firstly, I have all the pieces to the jigsaw puzzles, because clients will come in and they won’t want to tell you exactly how much they spent. They won’t want to tell you that they have high blood pressure because they’re like, it doesn’t matter. I’m gonna do it with medication, it’ll be fine. And it’s like, okay, but the trauma, I want to know that and they might want to know the other thing that makes your High Blood Pressure not okay, like you say, Sleep Apnea for a reason, you know, like, they don’t think it’s important, and they don’t understand what is actually important. So I started explaining about, you know, I love jigsaw puzzles is part of the reason that risk is something that I love doing because it is about fitting everything together and getting it in the right order, the right place in the pretty looking picture for the client. But it is hard to articulate when the clients just come in and say our will hold on. Firstly, the fee that I’m going to have to pay is more than I thought it would be. I then have to pay for premiums on top of that. So I want them to be the cheapest that they can be. So every single client that comes through the door, you’re having that conversation so I need to Go back thinking about a few things that John said earlier about, you know, here’s a video as to why we charge the fees that we do and what we do for your fee, rather than me articulating that conversation every single time I say client.

Fraser Jack
Yeah, that’s a really interesting point. Kathy in in. And while we’re talking about fees, traditionally, I guess with holistic advice, John, you know, you’re able to then sort of, if it costs a lot of money to do risk in, you know, sometimes that can be subsidized by investments and other parts of or other work you’re doing with clients? How are you able to then, you know, you know, for for re specialists say, Are you do you price risk in this as a true price? Or do you subsidize it? Or is it able to be a standalone thing?

John Cachia
Yeah, we still receive commission from insurance. Over these years, I’m still yet to be convinced that moving to a flat fee, or fee arrangement is the right way. And listen, there’s a lot of arguments for there’s a lot of my arguments against them, everyone has their own way to do things, we charge a fee for service for all of our other services, we’ve also got lending a part of the organization as well, too. And we don’t charge a fee for that service as well, too. We believe that the remuneration structures that are for those solutions are more affordable for the client, which is probably just one of our value sets, it’s just what we’re trying to do, and just making it more accessible by having it through that structure. So no, we don’t subsidize it actually, it’s clearly articulated on our service agreement that we actually don’t charge for that service. And in saying that, that’s not a blanket rule, obviously, there’s circumstances where we can’t be remunerated for via commissions. And therefore, we will charge a fee for those services as well. And I’m also thinking in the space of as well, too, that we may end up due to the situation that we’re in moving very much into the strategy only solution, which we haven’t talked about today, where there’s a lot of work in the background, about figuring out how much client needs in regards to the needs analysis, and in regards to that, and the appropriateness of the levels of cover. And I do think that there is a, there’s a strategy only solution that has come out to market widespread that I have seen yet. And then in that space, we would be charging a fee for service. So that that that solution.

Fraser Jack
Yeah, that’s an interesting, it’s a very interesting piece. And I guess the idea is just to work out what the, to be able to show the client, what the real value is in that strategy piece to be able to then you know, justify them coming in and putting some money for Serena, tell us about your that, you know, some of the work that you will do with regards to how you charge and how, you know, you obviously just risk specialist space, how do you then you know, make sure that you’re able to provide a service that’s, that’s both profitable and sustainable for you as a business as well as affordable for the client.

Serena West
Yeah, so it, it sort of has evolved over time. And I definitely got burnt myself as a business person many times because my helper gene is very strong. So I meet people, and I just want to do the work. And to me, I’m like, I know how to do this, let’s just get it done. So for certain situations, now, I would add a fee in as well, because the Commission received so we still do receive commission wouldn’t wouldn’t cover costs. When I look at the cost of time it takes for everyone to pull it all together. Not just me, but but my team of people, we need to add a base level in there. And that’s also getting a commitment from the client so that they’re not wasting all of our time and chopping us around. I don’t have time for that if you’re actually sitting in front of me, I will do the best that I absolutely can for you. But I don’t want to be duplicated out there that that’s really frustrating if that happens. And I learned that the hard way. So typically, the clients that I normally are referred, I think you’re often referred similar, I guess age and demographic to yourself. So I’m typically seeing people sort of my age range. So the premium that I’m seeing normally the commission is enough. And I don’t end up needing to charge on top of that, when we’re talking about claims, and I know that that is something that we’ll be covering off on a little bit later. I previously didn’t charge anything for claims. And for clients where I’ve written the work and I’ve received commissions along the way and it’s all worked perfectly. I’m not charging them anything for that because I have been paid along the way. If it’s someone that I have purely just met, and I’m stepping in to clean up an enormous mess. And it’s a result outcome. I’ve had to look at how I can manage that. Because some of these things take a lot longer than you think. And happy to talk about that a little bit further, maybe later in, in the conversation today,

Dr. Jeff Scott
when MetLife has gone around and surveyed various advisors Commission’s are, what we found is that fee for service as the PERT as a premium increases, fee for service becomes an option for clients as the pre if the premiums are small commissions allow clients to amortize the cost of advice over the duration of the policy. And so what you’re finding is that, depending upon the client’s circumstances, some of them have no problem going into their pocket and paying a fee for service. Others basically say I can’t pay the additional and commission a commission based arrangement is perfectly acceptable to them. And I think having that option available to clients a fee for service or commission based upon both the advisors business model and the amount of work they put in as well as the client’s affordability situation, I think is absolutely necessary. Yep.

Fraser Jack
Now, I did want to, I did want to go into their claim conversations, as well. Serena, you mentioned that sometimes people come to you to do a claim and they haven’t been you haven’t been the previous advisor and you got in you got to create, start again. Tell us about those conversations with clients around charging a fee for a claim?

Serena West
Well, that’s certainly something that I’ve done recently. And so previously, I just did it. And the reason I do so many claims is I find I learned something every single time I do one, even more. So when it is a mess. You know, the and I’m not talking about a medical mess, I’m talking about like a technical mess. So normally now when I’m looking at a claim, I try and assess, you know, is it a simple claim? Is that death, income protection, what are we actually working with, and how much time is going to need to go into it, how many insurers are involved? What are the definitions we’re looking at, and also what’s proportionate and fair in terms of their overall cost. Because I think all of us on this route, know that at times, there are others that will charge quite a high fee to help out and, or to do the work. And that’s I’m not trying to gouge I’m just actually trying to cover the cost for the work that we’re doing. So if I’m spending, you know, 10 hours a week doing that work, I’m not spending 10 hours a week doing other work. And as a business, I still need to pay my staff pay my costs, and all of those types of things. Plus also recognizing that the client or the person is getting an enormous, tangible outcome. I’ve kept a spreadsheet over the last eight, nine years of all of the claims that I’ve done. And I’ve separated it by gender type of claim, and where they came from, you know, were they one of mine, or were they someone else? And it’s it’s pretty interesting.

Fraser Jack
Yeah, that would be an interesting spreadsheet. Jeff, what are your thoughts with regards to the Do you have any stats there I suppose what I’m I’m I’m after around claims around, you know, the amount of time and effort and energy that goes into each client.

Dr. Jeff Scott
I wish I did. The industry stats on time energy effort has been quite quite sparse. app has tried to provide some general information on this at a macro level. But it’s been difficult to actually see claims duration based on claims duration success and the rest of based on that stuff. So I know that Apperson some initial work on this. I haven’t been able to find the details enough to provide a quality comment on it yet.

Fraser Jack
Yeah, I’ve always wanted to within the new products that are coming on whether they actually can create more headaches at claim time.

Dr. Jeff Scott
In what way? What would you think that’s Fraser?

Fraser Jack
Well, just just as the older products are most more certain around you know, the you’re going to get paid this you’re gonna get paid that then they would be maybe easier to to to administer it claimed and

Dr. Jeff Scott
when we think about the claim claim process, normally the process is look up the policy document, get the medical reports from the doctor’s interview the client, get the banking details that’s been fairly consistent in the in the process. And again, as John’s mentioned in previous podcasts, often the biggest difficulty is engaging with the medical professionals and getting the appropriate information in a timely fashion. So yes, that’s been that’s been an issue at underwriting stages. But it’s also an issue at claim stages. What we found is that once the insurance company informs the medical practitioner that this is for one of their clients in order that in order for them to receive a benefit. The turnaround time usually improves significantly. But it’s it’s getting that relevant information to say To sit back and say, Do we have the documentation? Yes, we do, then we can make the payment. That’s that’s been the often the biggest inhibitor to making sure it’s making sure that money, right money. Right. Right money, right person right time. Yep.

Fraser Jack
Fantastic Serena,

Serena West
one of the things that I would really reflect on is the timing of of the work that you do, can have some pretty big flow on consequences, particularly when you’re looking at buybacks. So making sure that as as a business, you’ve done all you can to trigger things at the right moment. So that if there is an opportunity down the track for those buybacks and things to flow on, that they do, and part of that also is making sure that the information is correct in the first place. So sometimes, I’m sure we’ve all known people who go by a slightly different name. You know, if their name is, Joe, their real name might be Giuseppe, or whatever it might be. And I’ve had a couple of cases where we’ve had to spend quite a bit of time just backtracking to actually make sure the person’s properly identified. So there’s all the detail comes out of claim time, every single thing you could think of it is detailed, and it’s not. Because the insurer is being difficult, it’s because they have to make sure that they’re paying the right person.

Fraser Jack
Yep. Fantastic, John,

John Cachia
listen, claims are a very, very interesting one. Because I think that there’s this whole like managing the client’s emotional situation, which I think is our role we’ve got the relationship with. But then sometimes I think, like, are we doing a bit too much. And I found myself doing that. So I don’t know about the other advisors on here. But we’re now saying that any kind of long term claims or potential long term times that we’re outsourcing those and where there’s a few kinds of claims specialists that are in the XY community, for example, where we’re partnering up with them to then refer that out, I would rather do that then obviously refer that out to a lawyer in most circumstances, I think an advisor with claim experience and understanding is way better suited for the client. And then just owning the relationship, which is more around getting them through that difficult time and setting the expectations around timeframes and what’s to be expected and continuing to hold. And so back in the day, we would sit there and do hours and hours of work, we’ve had a few long term clients that I should have charged probably 20 times more than I did, but you know, it is what it is. And I’m sure many people have those stories as well, too. But we ended up getting to a solution, which we would have like a yearly fee. So what would happen is that we would get into a scenario where we kind of say to them, Listen, this kind of arrangement will cover you for X amount of time. And then anything more than that period of time, and we weren’t necessarily saying it on numbers, it was more on yours. So like if this would take say longer than six months or longer than 12 months, it would trigger on a subsequent fee that we would need to charge you, then it became a little bit hard to administer. And then like it was just like put in the too hard basket with everything else going on in our profession. So we found this, the best thing for us is that if we think that the claim is simple, we will take that on internally. And then if it’s got any kind of complexities to that we will stay as the kind of relationship manager and then coordinate those those out and 10 years ago that wasn’t even available and even is around but you know, as people probably know, in the XY community, there are services that are do

Fraser Jack
that yet, and it’s been interesting time is it’s all changing. And you’re absolutely right. But there’s a lot of time and effort that goes into these claims. And, and I think I think the idea around the experience are that we’ve got a lot of experience around they’ll have these particular claims. And I think it’d be a shame to lose very much of that experience. And I think that’s what’s probably going to be happening with, you know, the people moving out of the industry, as the numbers drop is we’re actually going to lose a lot of years of claims experience.

John Cachia
And this is this is the other thing around phrase around innovation. So hopefully there’s people on here that are listening, that may be exiting the industry that they could be another role that’s been played out. And that’s a role of, of these kinds of claims, assessment and management and all of this stuff as well, too. And I think there’s a lot in regards to the the ongoing support of the licensed, licensed financial advisors, like we have a community of paraplanners and like we have a community of support staff or do we have a community of, you know, specialists that are practicing advisors that some way or some, some way can continue to contribute because there are some great risk advisors out there with so much experience and you know, I’ve got a young team and trying to kind of link those up would be absolutely amazing. And then these, these particular times that I reckon they know better than most.

Fraser Jack
Yep, couldn’t agree more.

Dr. Jeff Scott
For one thing that I’ve, that I’ve realized from the APA stats is that when an advisor is involved, the dropout rate for a claim is reduced significantly. So the time energy and effort that the advisor puts in to ensuring the client gets through the process ensures that from whether it be death, or TPD, or trauma or income protection, that more clients go through the process, and they don’t sit back and say, I’ve had enough, I’m going to drop out. And when we compare the work that an advisor does, versus them going it alone, whether it be through the direct to insurance policies, the group policies and stuff through super advisors add an incredible amount of value, by allowing the client to navigate the process to getting them that claim payment, yet

Fraser Jack
is interesting, the difference between the advised and non advised in the presets. Just just on that though, that’s a really interesting point. Because there if the stats are so different, why, you know, how do we get there? How do we get to that point where we’ve got clients that are not getting getting their claims paid? Because maybe they’re there’s we’re missing a person middle?

Serena West
I think also, you would need to bear in mind some of the claims that aren’t paid shouldn’t be paid. Potentially, if someone comes to an advisor, and I received one yesterday where someone sent me some hospital records that have been in the last couple of weeks, and the same this has just happened, can you suss it out and see if we’re eligible for a claim? So at times people might be lodging a claim that eligible when really a bandaid was sufficient?

Fraser Jack
Yeah. And so the advisor cuts that off at the past. Yeah, thank you everybody. For being part of this episode, we were talking about the the actual humans involved in the process and with with regard to the products, I look forward to catching you all in the next episode.