Dealing with life insurance claims as an adviser
The extent to which protection advisers get involved with life insurance claims – if at all – depends on the adviser and the firm. Some will only get involved occasionally, if the client asks them to, while others might have a designated claims team.
But if advisers want to help clients through the claims process themselves, what should they be doing and why?
Implement a claims process
The world of protection claims is all about processes, but we tend to think of that in relation to insurers. It may not occur to an advice firm dealing with death claims that they also need to have a process in place – even if their involvement with claims is minimal.
“So many brokers haven’t thought about implementing a claims process,” says Protection Distributors Group board member Emma Thomson. “If a client dies, what’s your process to update your system to ensure you are not sending something out that could upset the family?” she asks.
Thomson also points out that when an adviser is notified of a claim – for example, if they get a call from someone saying their husband has died – there needs to be a process.
“Are you going to contact the insurer or are you going to get the client to do it?” she says. “Everyone should understand what they need to do.”
Life insurance is one of the simpler forms of protection but that does not necessarily mean a claim will be simple and fast to process.
“With life insurance claims, everything depends on the person’s age or condition,” says Cover My Bubble founder Emma Astley. “I had a client who passed away at age 31 – she died in her sleep from Sudden Arrhythmic Death Syndrome (SADS) and the toxicology report took months, which prolonged the claim.”
In this case, the insurer needed reports from the coroner and the GP before settling the claim.
According to the British Heart Foundation, SADS is when someone dies suddenly and unexpectedly from a cardiac arrest, but the cause is unclear. It affects around 500 people a year in the UK.
Astley says that, if the claim relates to an older person with an over-50s type of policy which isn’t underwritten, there are no medical questions to check. But if the policy is underwritten, the insurer may want to see a GP report to check there was no non-disclosure or incorrect details on the application form.
Extra benefits and support
Clients and their families will be aware of the payout on death under a life insurance policy. But they may not be so familiar with any additional benefits and value-added services a policy may also offer – which is where an adviser can help.
For example, a life insurance policy may pay out a terminal illness benefit if the policyholder is diagnosed with a terminal illness that reduces their life expectancy.
Usually, that is defined as when doctors say the policyholder has less than 12 months to live. In these traumatic circumstances, being able to offer these clients and their families something more than they expected provides a moment of joy.
“Clients think life cover is just that – but there’s nothing nicer than telling someone their terminal illness benefit will be paid,” says LifeSearch financial adviser Lisa Kelly, a specialist in claims.
Thomson says advisers could be checking to see what other value-added benefits are provided at claim through the life cover or any other policies the client has. “There could be extra support available, and this may be positioned as something for families to let you know when they’re ready for it,” she says.
Another useful resource for advisers who want to help clients find out if they’re eligible for state benefits is the Turn2us website.
“It’s a charity that highlights state benefits and other types of financial support people could get,” says Thomson. “There is so much useful information on there – advisers should have it in their pocket even for clients who have not made a claim.”
It goes without saying, but supporting families with life insurance claims requires a sensitive approach. Sometimes, however, those working in the industry can be so focused on doing their job that showing some compassion gets forgotten.
“Be sympathetic – I’ve heard about some claims calls where the person has not even said sorry for your loss,” says Kelly.
Wills and trusts
When a client dies and a life insurance claim comes in, advisers need to be thinking about wills and trusts.
If there is no will and the life policy has not been written in trust, payouts to loved ones may be potentially delayed due to probate. Loved ones may then worry about having enough money to pay for the funeral, but advisers can help here.
“If the policy isn’t in trust, find out from the family if there is a will in place,” says Thomson. “All insurers have at least a £5,000 funeral policy in event of probate delays, so they can advance some money, even if they are unable to pay the death claim.”
Funeral directors are paid directly, which takes the pressure away from grieving families.
For families experiencing financial hardship, Thomson suggests advisers ask the insurer if they have any special arrangements for people while they wait for their claim to be assessed. At the other extreme, families who receive a large payout might need advice on what to do with it.
“If they get a £400,000 lump sum, do they need advice on how best to manage that money? They might not want to pay off their mortgage debt,” says Thomson. “But the adviser might need some help with that. If they specialise in protection, they might want to signpost to a holistic adviser or wealth adviser.”
