Over the years, the New Zealand insurance industry has seen a real rise in ‘direct distribution’. Direct distribution is when insurance companies sell their products online through third-party channels (like banks), or via online tools that automatically compare insurance options. If you’ve been wondering how this direct approach stacks up against tailored advice from an independent adviser, you’re not the only one.
Let’s break down some of the most common misconceptions about purchasing insurance direct – and why we believe that independent financial advice is the best way forward.
Insurance companies who sell direct products often upsell the simplicity, ease, and speed of their online application process. But a shorter application form also means significantly fewer questions asked about your health. And while it’s true this makes the process quicker, it also leaves more room for error – which could come back to bite you come claim time.
When making a claim, you often need to remember symptoms or conditions you suffered a number of years ago. This means the more specific the application questions, the more likely they are to jog your memory. Plus, with fewer and more generalised application questions, you risk accidentally leaving out important information. If so, you could easily find yourself in a position of ‘material non-disclosure’ – which could see your claim going unpaid.
This is why working with an adviser is so important. When you first apply for cover, your adviser will go through the application form with you. They’ll highlight the significance of the questions, explain what we need to know and why, and stress the importance of fully disclosing everything. While this more comprehensive application process can take more time, it also gives you the chance to tailor your cover to suit your unique circumstances. It gives you much more certainty about what your policy covers you for. And it means having a friendly and experienced advocate there to help you along the way.
So before you decide to go direct, take a moment to ask yourself… is a few minutes saved now really worth potentially missing out on a claim in the future?
You might have heard that direct insurance products are cheaper simply because they cut out the middleman. In reality, direct insurance often appears cheaper because its products are poorer.
Compare the bare-basics direct insurance products with the fully-featured products sold through advisers, and you’ll soon see that when it comes to insurance, you’re not always comparing apples with apples. For example, Life Cover purchased through a direct insurer might only pay a benefit when the person insured passes away. Partners Life, on the other hand, will also pay if the insured becomes terminally ill. Their Life Cover also comes with a number of other benefits, like financial support for funeral costs or transporting remains.
Generally, the poorer the product, the higher the likelihood it won’t pay a claim that a superior product would. If there ever comes a time that you really need your insurance to be there for you, would saving a few dollars a week have been worth it?
Actually, not all insurance companies were created equal. We’ve already covered the fact that direct products don’t always cover you like the fully-featured products that advisers recommend. But there’s another, even bigger, and even more serious difference; the way various insurance companies manage claims.
Differences in claims management often don’t become obvious until the worst possible time; the time when you need to make a claim. It’s then that many will unfortunately realise that not all insurance companies do right by their customers. Just look at the extensive media coverage of countless contentious claims, and you can see that some will do anything to avoid paying a claim. Without the expert knowledge and industry experience of an independent financial adviser, you could be left at the mercy of the very company who you relied on to be there for you when you needed them.
Just as there are good and bad practitioners in any profession, there are good and bad advisers in insurance. But even an ‘average’ adviser, who might be influenced by commissions, is better than no adviser at all. After all, when it comes to dealing with insurance claims, they still have far more knowledge and experience than the average person. Their input could be the difference between a claim being paid, or denied.
As for a good adviser? They’re worth their weight in gold. They’ll make sure you and your family have exactly the right level and type of protection. They’ll regularly review your needs to make sure your coverage keeps up with your circumstances. And most important of all, they’ll be your guide and advocate at claim time.
The financial adviser’s advocacy role is often underrated. But when life throws you a curveball, the last thing you need is the stress of sorting a claim. If or when that day comes, you’ll be glad to have an adviser by your side – helping you bear the load, streamline the process, and keep the product provider honest. So you can focus on what matters most; you and your family.
While independent advisers don’t always mean the fastest application process or the cheapest premiums, insurance is about so much more than that. It’s there to provide financial aid to you and your family, whatever life brings. With a great independent adviser in your corner, you can make sure your insurance covers you for what you need, when you need it. So… if you want our advice? Advice is the way to go.
– article written by Partners Life and adapted here