For advisers, the changes bring expanded responsibilities and a likely increase in lapse rates, but also new opportunities to engage with clients and emphasise the value that their risk insurance provides them.
Trustees will be writing to all of their members by 1 December 2019 to notify them that they will lose their cover on 1 April 2020 if their balance is below $6,000. Included in this communication will be an explanation that a member can ‘opt-in’ to keep their cover.
AIA Australia’s recommendation is that advisers, with the support of the industry, take a proactive approach to reinforcing this message by creating an education strategy for clients. Life insurance is a complex product that many Australians lack a comprehensive understanding of; greater awareness around the benefits and security that life insurance provides – and of the risks that a lack of cover exposes one to – should translate to fewer Australians allowing their cover to lapse.
A good first step is sharing relevant documents and details on these changes with your clients via your social media platforms. Moreover, many advisers have found that their clients wrongly believe that to opt-in for their cover they need to make a contribution, so take the time when speaking with your clients to let them know what opt-in means.
Equally important is identifying clients at risk of having their cover cancelled, and outlining to them the advantages of maintaining their cover. This is particularly important if your client has significant health issues. While the PMIF legislation does include a ‘dangerous occupation’ exemption that allows trustees to continue providing opt-out insurance to members who work in emergency services or other specified occupations, it doesn’t take into account clients who have pre-existing health conditions. As a result, these clients could end up with their insurance policies unbolted, leaving them unable to obtain cover again.