Case study: Financial hardship
Select Start to begin.Start
Arlene Wilson owes money to your insurance firm as she has made a claim and needs to pay a $1,000 excess.
Arlene: "Look, the issue is I'm experiencing a little bit of financial hardship because I've recently lost my job, and to add to the pain of it all, I just got some big bills.
Are you able to help?".Continue
How do you respond?
"Ahhh…that’s a relief. I’ve heard so many horror stories. It’s great to hear you’re willing to help".
Arlene sounds please with the resolution. Is there anything else you can do?Try again
"That’s wonderful. You’ve been such a great help. Thank you so much. You’re an absolute lifesaver".
Nice work on receiving such praise. What's another choice you could make to ensure the same positive reaction?Try again
"Well I'll be approaching some current affairs programs about this. You people have absolutely no feelings".
"I'm down to my last dollar and you're not willing to help! I thought you people were different to other insurers but you’re all the same".
Review section 8 of the Code and re-think your response.Try again
What is some of the additional information requested in this form to assist the insurer you work for in determining financial hardship?
Additional information that will also assist in determining financial hardship includes:
- Centrelink statements (for Centrelink clients)
- Financial dependent details
- Personal assets
Note: Other information could include evidence of serious illness, unemployment or disability.
Refer to Section 8 of the Code to assist you answer this question.
After receiving Arlene’s claim for financial hardship assistance, your organisation determines her entitlements.
What are some example payment arrangements that your organisation could organise to assist Arlene?
According to Section 8 of the Code, your organisation could work with Arlene to consider some (or a combination) of the following arrangements:
- extending the payment due-date
- allowing Arlene to pay in instalments
- allowing Arlene to pay a reduced lump sum amount
- postponing one (or more) instalment payment for an agreed period.
Note: You would need to provide this agreement to Arlene in writing.
If a customer had a home loan with a bank, why would the insurance company need to advise the bank of the customer's insurance policy?
As the lender of finance, the bank has a right to have the proceeds of a major claim payment paid to them to dispose of the mortgage, leaving the customer to re-apply for finance on any new building structure. The customer may well be behind in the finance agreement payments or be in breach of other aspects of the finance agreement.
In most cases, the finance party would have the legal right to 'first call' on the payment of claims proceeds where their interests are involved.
What would you do if a substantial payment was involved and no financially interested party was noted on the policy records?
Always ask if there is a financially interested party because one may have been included since the policy was taken out or last renewed.
For example, a search of the title to the building, property or vehicle ownership would certainly be appropriate to help prove financially unencumbered ownership.
Third Party Hardship
George Karamboulos becomes unemployed and has to rely on income from unemployment benefits.
A couple of years ago, George was in a car accident for which he was responsible and the other driver's insurer organised for George to pay the damage debt of $50 a week over 3 years (in order to recoup its costs).
Upon being informed of George's dismissal, the insurer negotiates an alternative payment arrangement until he gets another job and can resume payments.
As the third party in the motor vehicle accident, George need to cooperate with the insurer to find a mutually acceptable financial solution. Additionally, the insurer needs to abide by certain Code guidelines and provide George with different methods of assistance with his financial hardship.
What would be some examples of 'other reasonable causes' of financial hardship resulting in an inability to repay debts?
- Collection agents – however they were called – pressing for payment
- Death in the family – with large sums to be paid for funeral expenses, etc.
- Single parent raising children
- Limited income—for example, Government age pension is only source of income.
What could the insurer do to assist a third party having difficulty repaying a debt due to financial hardship?
The insurer would consider one of the following options:
- extending the period of repayment
- postponing payments
- extending the period of repayment and postponing payments.
Case study: financial hardship
Consider the following two case studies which highlight how customers may experience financial hardship.
Respond to the questions with regard to how the insurer dealt with the insured.
What will be your advice to both Peter Yeo and Meena Tabriz? How will you be able to assist them, and what steps will you now take with each claim in accordance with the requirements of the Code?
While the sums to be claimed are very different, and neither customer has specifically requested special consideration, it is obvious that both cases involve financial hardship that can be satisfactorily demonstrated.
The point here is that financial hardship is a relative term. Vastly different events have left both Peter and Meena in urgent financial need. The emphasis would be on the claims handler to implement steps to alleviate both customers' situations as quickly as possible.
Under the Code, if customers can satisfactorily demonstrate to their insurers that they are in urgent financial need (of the benefits they are entitled to under their policies), then insurers must fast-track the assessment and decision processes of their claims.
This means that insurers can make an advance payment within 5 business days to help alleviate a customer's immediate hardship. In Peter Yeo's case, you may not be able to do much about making a payment for the house, particularly if there is a mortgage, but you must notify any other financial institutions that have an interest in the insurance policy – e.g. banks or mortgage finance companies.
However, house repairs or replacement of contents are not the most pressing need in the Yeo family's case. Organising for Peter and his family to have some money for their immediate needs is very much the pressing issue. Further, if their policy allows, you can arrange advance payment for alternative rental accommodation, rent in advance and bond money. After all, it is likely that any credit cards, wallets and all forms of identification have been destroyed by the fire.
If you arrange for Peter's car to be repaired, you will accept responsibility for the quality of workmanship and materials for those repairs.
In Meena's case, it is the theft of the money that is the real issue. Paying the electricity bill before it is disconnected and providing money for food is a priority. The TV and other equipment can wait a little longer, if necessary.