Risk Management: Slapped by ratings, exclusions, extra premiums

I read with much interest where the public shares their discomfort of being slapped with ratings, exclusions (etc) being imposed on their life insurance policies.

Prevention is better than Cure. Most of you who were fortunate to have any insurance plan implemented, you will not be facing such a problem. However, there may be situation where you may have delayed implementing your solution because:

·         I am too busy.

·         It would not happen to me.

·         No hurry. No worry, No need.

·         Buying insurance is bad luck, etc

(As we grey towards being more distinguished, these may lead to medical illness being diagnosed. The first step in prevention is buying early to avoid the possible imposition of ‘extras’.)

These are endless situation that promotes the procrastination of financial planning. These are situation that leads the Public to Plan to Fail rather than Fail to Plan. Similarly, these are the same reason why people do not see the investment of getting their timely, health screening being implemented.

When they ‘feel’ like it or when they are ready, the respective ‘financial’ or medical health screening is implemented. Time waits for NO man. Upon the ‘financial’ or medical health screening, the diagnosis may/would highlight certain health conditions.

As a result, extra premiums, ratings, and exclusions (etc) will be imposed for sub standards cases due to a medical condition. And the public responses

·         Too expensive (compared to what)

·         Too much exclusions (there are other diagnosis or accidents which may occur)

·         Unreasonable ratings, and endless reasons

As such, the majority of the public does not take up the plan or procrastinate indefinitely. (Please allow me to crystallize the solution on how to see the actual problem.) Let us look at the situation from a medical point of view. You may have being diagnosed of

·         Obesity, high BMI

·         Hypertension, High Cholesterol

·         Major illness like Cancer (Stage 2 or higher)

As a client or a ‘patient’, would you say that you would not seek treatment for yourself and your loved ones? Would you respond that the treatment is

·         Too expensive

·         Too much exclusions

·         Unreasonable ratings and endless reasons

These two situations are NO different. Do we have double standards in implementing a solution? You are the judge. You decide!

My opinion is you should execute or accept the plan with the best offer (While the tied agant is ONLY able to offer from their respective insurer, independant financial advisers (IFA) can provide various offer from more than one insurer!).

The justification. Here is why you do not procrastinate, once the plan is implemented by paying a ‘premium’, the risk or the financial impact is immediately transferred to the insurer – risk management. You will then have achieved a financial peace of mind because when the unfavorable event occurs, the benefits will be payable (read related blog on insurance claim problem)

Seeking a recommendation is not buying insurance. (Read related blog on common mistakes) One of the processes of financial planning is to identify your financial risk, the impact of that financial risk, how much damage or the expenses will cost? Seeking solutions is the planning. After which, executing by implementing a solution is the risk transfer of that financial risk.

In my opinion, the point here is not whether the solution is expensive, or the ratings or health extras imposed, it is whether you are serious about identifying a financial impact to you or your loved ones, and whether you want a peace of mind by transferring the risk. If you have failed to be convinced, we as financial planners have failed, not YOU. The FP never SELLS, he is merely trying to explain the consequences and YOU decide.

The value add of a financial planner lies not in just doing a fact find, analysis and making recommendations. in addition, the FP should lay down all the facts, possibilities, advantages and disadvanages of implementing, and, NOT implementing the solution and the financial impact. Once the various solutions are laid down on the table (due diligence done by the FP), the end decision is YOURS ENTIRELY!

After which, the client is deemed informed of possible recommendations and decides to implement or NOT. There is no right or wrong answer. However, the FP had done his due diligence. This is the due diligence of the Financial Planner. This differentiates the salesman from the professional Financial Planner.

Now that you may have viewed the financial impacts from a different angle, you may know how to decide if being faced by a similar situation in the future. If you had encounter this problem before, you may wish to reconsider your previous decision before any conditions deteriorates. It is better, to implement the solution LATER (meaning now) than Never. Please consider for yourself and your loved ones. If you are still not convinced, please seek your financial planner or a second opinion!

Related reads:

How to avoid insurance claim problem with your insurer in the future?

The most common mistakes the public make when buying a financial solution!

Why you should not buy Insurance blindly?

Before you BUY your first/next insurance policy…