Why is the point a client's disclosure ceases and a policy commences such a difficult, contentious point?

There have been far more words written about this than there needs to be, and that's just my words.

And sure, the commencement date is the commencement date, but is it?

If you look around the industry on the policy schedules littering your client files, you'll see a vast range of terminology and differences on this point.

AIA's old Sovereign system is a classic example. You have the system's policy start date, issue date, and commencement date.

The commencement date is the 20th of the month following the date of the actual policy issue.

• Issued on the 15th of May, commencement date is May 20.
• Issued on the 23rd of May, commencement date is June 20.

The start date is the date the client intended the policy to start, the billing cycle that suited them, and the day they pay the premiums usually.

The issue date is the date that the cover commenced, the day the policy went into force, and the cover actually began. Yes, the policy issued on the 15th claim on the 19th, technically before the commencement date.

This variety of definitions results in questions like the ones I have been asking. Because when it comes to claims early in the policy, like the out-the-window example I gave, it's pretty important.

From a servicing perspective, it's pretty important, too, as that date of first symptoms for a condition for a client often dates back close to policy commencement dates too. Unless that commencement date is the 20th of May and the policy was issued on the 21st of April, then we have an extra month to play with on the old Sovereign system.

This stuff can be quite important when considering a 30-90 day post-issue first symptoms clause for something. And it's astounding how many new trauma claims have the first symptoms 91-92 days after the policy was taken. (Old Sovereign stats of the time)

Though several providers have updated their stance more recently to be the date of application or signing of terms for these post-issue stand-down periods.

As an adviser assessing existing cover as suitable, dates of first symptoms relative to policy commencement are quite important and is the difference between saying this policy looks good or bugger, we will have to look at the disclosure. And there's been plenty of these land in my lap over the years too.

In the past, the attitude and approach may have been "don't worry about the old one, just go with the new one", but under the present rules of the client first, not advising on the existing cover as suitable is a fundamental point in the advice needs analysis, research, and due diligence, and fails the basic expectation of a regulated advice process.

Now if you don't want to go into that detail, you don't have to, but you do have to be clear in your scope of service to your client that you are not investigating the suitability of their existing cover and you're only looking at new policies... That's not necessarily going to go down well when terms arrive, and they say, what about the old one?

As advisers, we now have a triad of responsibility.

1. The client
2. The insurer/provider
3. And the FMA.

We have to be able to meet the expectations of all three at the same time if we are to remain within our professional obligations.

To do so, we have to have a few things simplified and really really clear from insurers/providers.

Vague statements of "when they are on-risk" or "when the policy is issued" don't provide specificity on when that actually is and leave significant interpretation around something that should be very simple.

We need these statements to come with the glossary definitions the insurers love to put in their contracts, for other words that have meaning but are different just for their contract.

We need to have precise clarity on what and when key points in the client and policy life cycle mean to navigate this new minefield with any hope of staying out of trouble.

This means when you boil it down, those providers that can be really clear in their documentation and processes will gain more favour with FAP compliance managers.

Because compliance managers can write unambiguous rules and processes around those points for their FAP, and this will drive preferred provider policies inside FAPs

Something many of our providers are yet to wake up to, as it hasn't been hard tested yet, but it's coming. The days of the policy being recommended because the adviser likes the business development or sale feature of a product are numbered.

Anyone who thinks the FMA will be sitting back and taking a softly softly approach, as they have for the past five years, has a hard thing coming.

The FMA has been waiting to have everything we now have in place so they can focus on being far more effective, as the past rules gave them no teeth to do anything, even with AFA's doing insurance.

Times have changed, and I'm not about to have my business and livelihood put at risk because a provider can't get the basics straight.

It needs to be really simple. The commencement date of a policy is ... and this is within/at the/something time.

Something is a reasonable time frame after a policy is accepted, standard terms or not, by the provider so we don't have situations where clients are exposed for weeks before they actually have coverage.

We are expected to do better as an industry, and we can be significantly better. We need to get on with it.