Advice has a number of contributors to claim outcomes. Courtesy of ASIC, we now have data to quantify exactly how those help consumers at claim time compared to non-advised insurance. The data is in section 184 of the ASIC report - page 53. This is how it breaks down, by claim outcome:
Non-advised decline rate is 12%, compared to just 7% for advised channel claims. That is a huge variation: you are almost 70% more likely to have a claim declined in a non-advised channel product. Why is that? The chances are, its the product. Advisers do not sell the types of products that are commonly sold in non-advised channels. The differences will be mainly in pre-existing conditions exclusions and the absence of underwriting in many of these products. This is a valuable indication of the size of penalty that Quality Product Research Limited should consider when rating non-underwritten products. This may also be influenced by the adviser reviewing the potential claim, and pointing out when it really shouldn't be made.
Non-advised claim withdrawal rate is 11%, compared to 12% for advised channel claims. That gap is again bigger than it looks. The claims withdrawal rate could mean quite different things. An adviser may recommend putting in a marginal claim and withdraw it when it becomes obvious that it will not succeed. Or a client might make a claim and be talked out of it by an adviser - especially if the nature of the claim meant that it was, in fact, misrepresentation or fraud. We don't know, and it might be good to talk about this.
Non-advised partial claim acceptance is just 1%, compared to 3% for advised channel claims. This gap is again bigger than it looks. It will reflect a mix of things: the first is again product design. Advisers are more likely to choose complicated but comprehensive products which include partial payments. Non-advised channels, in their quest for simplicity, tend not to have these features. Another possibility is that advisers can advocate for payments for their clients under sections of their complex wordings that clients themselves might overlook even if they buy a complex product from a non-advised channel. Lastly advisers may be twisting insurance company arms: a client on their own is just one client, an adviser represents a large number of current and future clients too, which may prompt a little more flexibility in marginal cases.
Both channels have the same level of 'undetermined or unspecified' outcomes - of 3%.
That leaves the 'Accepted in Full' category of claims at 74% for non-advised and 76% for advised channels.
Of course, these are only averages, for some companies the decline rates are higher, and some much higher. There also appears to be an interesting effect on the level of disputes, but we will write on that later.
Lastly it should be pointed out that the claim acceptance rate on insurance you don't buy is always 0%. I am a great advocate for insurance and feel that non-advised cover fills an important gap for many people. 74% full claim success rate is a very, very, great deal better bet than not buying cover at all.