Insurance: Solving complaints

The increase in the settlement rate reflects the fact that the OLHI received a higher proportion of complaints in which the ombudservice found that an insurer had not made an appropriate decision and, thus, warranted an investigation, says Holly Nicholson, executive director of the OLHI.

“We apply principles of merit and fairness when deciding to escalate or turn down complaints,” Nicholson wrote in an email to Investment Executive. “The actual number of settlements we are able to negotiate for consumers each year is driven principally by the merit of the complaints we receive.”

A vast majority of the complaints that the OLHI receives pertain to life, disability and employee benefits coverage, and more than half of complaints are related to denied insurance claims, Nicholson says. The volume of complaints in the latter category has been trending steadily higher in the past few years, figures from the OLHI show.

Many of the complaints pertaining to denied claims occur in situations in which a consumer has purchased mortgage life insurance or another simplified issue insurance policy, which are underwritten on the basis of a series of medical questions rather than on a physical examination, says Jay Bernbaum, senior insurance advisor with TriDelta Financial Partners Inc. in Toronto.

Those policies tend to have a higher proportion of denied claims compared with policies that require full medical underwriting because insurers investigate the medical records of simplified issue policyholders at the time of claim rather than before the policy is issued.

“A little bit of information is provided up front,” says Bernbaum. “In the event something happens, that’s when [the insurers] do all of their due diligence, and if there’s any discrepancy between what was put on that initial mortgage or life insurance application [vs] at the claim time, then [insurers] have denied claims.”

Clients are much better off buying a life insurance policy with full medical underwriting, Bernbaum says, so that there are no surprises at the time of claim.

“It’s the insurance company’s job to do as much due diligence as they can on the applicant,” he says. “So, upon a claim, there is no room for error.”

However, with many insurers expanding their simplified issue offerings in the past few years in an effort to win the business of clients who want a quicker, easier way of buying insurance, the uptick in complaints related to denied claims could accelerate in the years to come.

Another area in which the OLHI receives complaints is marketing and sales and, in particular, agent conduct. Specifically, Nicholson says, the ombudservice commonly hears complaints that an advisor failed to advise the consumer adequately on the features of a product.

Jerome Dean, a life insurance contract reader and advisor in Mississauga, Ont., who specializes in consumer awareness and education, says he is not surprised that there are complaints in that area: “A lot of policies are being sold in the wrong manner or without enough information.”

Dean works mainly with clients who already have life insurance and helps them to review their coverage to ensure it’s meeting their needs. A vast majority of clients, he says, don’t understand how their policy works: “There’s a lack of information. Clients just don’t know what they’re getting. That’s when complaints happen.”

Given the complex nature of insurance products, advisors must help their clients understand the various options and help them to identify the type of coverage best suited to their needs, Bernbaum says: “It’s important to make sure that the education is there.”

Dean says he’s encouraged that the OLHI is having more success in helping clients settle their disputes with insurance companies. He suspects that there would be even more complaints if a greater proportion of consumers were familiar with the services that the OLHI provides. “Not a lot of consumers know about the ombudservice,” he says. “It’s the advisor’s job to tell clients that there’s a non- profit organization that handles national complaints.”

Although the ratio of cases that the OLHI settles in favour of consumers depends largely upon the merit of the complaints it receives, Nicholson says, she expects the OLHI will be able to maintain a proportion of settlements in the future similar to what the ombudservice achieved this year. The OLHI made improvements to its complaints process over the past two years, she says, which contributed to the increase in settlements.

“Our case reviews at the initial level are more thorough and rigorous,” she wrote in her email. “With these improvements, we do expect the settlement ratio to remain at this higher level going forward.”

Although the settlement recommendations made by the OLHI are not binding, Nicholson says, insurers have accepted every recommendation that the ombudservice has made in favour of consumers so far.

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