200272: Insurance Advising Theory and Practice Assessment Answer

Unit Code: 200272

Insurance Advising Theory and Practice Assessment Answer

TASK: The individual has written task addresses and assesses key learning outcomes as follows: 1. Describe how the various risk concepts, classifications, rules and methods of handling risk are integrated into the overall risk management process. 2. Demonstrate a comprehensive understanding of the Australian regulatory environment in which risk management advice and insurance products are provided. 3. Understand the fact-finding process and how to prepare a needs analysis to provide resulting insurance recommendations 4. Critically assess the risk management and insurance needs of individuals and small business. 5. Describe the different types of life, general and other insurance products and their application to real-world consumers and small business. Task Requirement Students are required to read and analyse a case study for potential clients. Based on the information outlined in the case study, students are required to identify and discuss the risks that the clients face to achieving their stated financial goals. This discussion should include an attempt to quantify the risk exposure and also explore the different options for managing each risk. Students are also required to make recommendations on how they would advise the client to manage each of the risks they identify. Your analysis should be presented to the client in the form of a “Discussion Paper” and should include the following sections: ? Cover Letter ? Cover Page ? Executive Summary ? Table of Contents ? Basis for Your Advice ? Your Advice ? Other important information Case Study Information You are an authorised representative with many years’ experience in the insurance and financial planning industry. You have recently attained your Master of Business (Financial Planning) degree, which is in addition to your previous qualification, an Advanced Diploma of Financial Services (FP). You run a very successful practice Peak Risk Solutions (PRS) in the heart of downtown Parramatta. Your executive assistant John has just informed you that prospective new clients Amanda and Anthony Rossetto are ready and waiting to see you. Amanda and Anthony Rossetto seem an interesting couple and are very specific in that they are only seeking guidance and possible advice from you in relation to their unique risk management situation. Amanda and Anthony Rossetto make very clear their concern is about their future wellbeing and protection and their desire for assistance in developing a risk management plan for their family. John has already sent Amanda and Anthony Rossetto a Client Profile (commonly referred to as a Fact Finder or data collection instrument) to complete and your Dealer’s Financial Services Guide (FSG). This identifies you as an authorized representative (use your student ID as a reference for this) of licensed dealer: Peak Risk Solutions Pty Ltd (PRS), a leading provider of risk management services including personal and general insurance, financial planning, and risk solutions. After analysing the completed Fact Finder and client file you determine the following information. Amanda Rossetto was born in 1980 she married Anthony born in 1979 some 12 years ago. They have twins Michelle and Chella aged 10. Amanda is a recent university graduate with a Bachelor or Applied Science. She works part time in a local retail outlet earning $25,000 per year. Anthony is an Accountant running his own practice. He works long hours in CBD of Sydney. He currently draws a salary from the business of $180,000 per annum. The business employs two part-time staff Nicole the receptionist and Michael the accounts payable clerk. The following annual expenses relate to the business. Rent of Premises                   $35,000 Wages                                     $60,000 Anthonys Salary                    $180,000 Electricity & other Utilities   $7,000 Stationery and consumables  $12,000 Computer support                  $7,000 Anthony recently went to the doctor for a health check and was amazed to find that he had extremely high cholesterol level and the doctor is concerned and ordered more tests. Amanda fears Anthony could have a heart attack as he has a family history with his father dying from a heart attack at age 50. The doctor advised him to review his lifestyle and reduce his stress at work. Anthony laughed at this proposition. The business is in a huge growth phase and there is no one he can call on for support and sees a lot of hard work ahead of him at least in the short term. Hearing this Amanda became concerned and urged her husband to reconsider his position. However, this had little effect. They have a house on acreage in a leafy suburb of Sydney. They have a mortgage of $ 800,000on their home which was recently valued at $1,550,000.They both own cars, she drives a Mazda sports car and he drives a Lexus. The cars are valued at $160,000 in total and they have an outstanding loan of $50,000 and they have no comprehensive insurance as the costs of the premiums are prohibitive. Additionally they have a credit card debt the balance of which averages $4,000. Amanda and Anthony believe in private education and estimate that they will need $600,000 for each child not including university expenses. The children will be totally dependent on their parents till age 25. Anthony’s parents died recently in motor vehicle crash and since that time he has been totally responsible for the financial support of his alcoholic sister Marilyn, who is unable to work. Marilyn is currently 28 years old and receives unemployment benefits of $18000 per annum from Centrelink. Most of this is spent on alcohol. Anthony feels morally obliged to support his sister financially and he has set aside $1000 per month to meet Marilyn’s needs. In relation to the rest of his family Anthony estimates that they spend $2000 per month on their living expenses and an additional $200 per week on each member of the family. They are not keen on insurance and see it as a waste of money. Hence their house in uninsured and their contents valued $500,000 including $250,000 worth of art is also uninsured. At the present time the family has no private health insurance. Additional Information: ? The current life expectancy of women is 85 years and men 80 years ? Funeral costs approx $10,000 ? Legal expenses $5,000 ? Medical costs $50,000 ? Emergency Funds $20,000 Required: Anthony and Amanda are particularly concerned about developing a risk management plan for the family. Respond to this request for information by preparing a “Discussion Paper”. Included in your preparation should be: ? your understanding of their needs and objectives ? a risk assessment in relation to the family and a summary of Amanda and Anthony’s wealth protection (insurance) needs ? an outline of the types of products suitable for discussion, including analysis of specific products available in the Australian marketplace) and a calculation of the level of cover required for each product ? the criteria for why you have chosen to include a specific product in your recommendation, e.g. This could be by way of a table or chart comparing fictitious product features and benefits, options, etc. ? There is no need to source specific products. Use generic products for recommendation purposes. For example, ABC Life covers ? List any questions that you would have for Amanda and Anthony to gain further insight into their situation.

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