Media reports downplaying the value of Total and Permanent Disability (TPD) insurance have been rejected by two life insurance experts as confusing for consumers and ‘trying to make something out of nothing’.
The comments come from The Risk Store, Founder, Sue Laing and Managing Director, Pete Wincott, who wrote to subscribers providing a detailed response to a recent article in a major newspaper, which stated that ‘any occupation’ policies offered little or no protection to those who held these policies through a superannuation fund.
This purported lack of protection was attributed to the ‘any occupation’ definitions compared with ‘own occupation’, the article stated, with the former policies only paying out when a person was totally and permanently disabled or dead.
In the note to subscribers to The Risk Store, Laing and Wincott said the article was inaccurate and portrayed the ‘any occupation’ definition within group TPD policies as a flaw or a failure when it was actually part of the structure of group life policies and reflects a legislated wording.
“No-one has ever said any different about group TPD cover. It’s always been the ‘any’ occupation definition. This isn’t news…everyone with group TPD will only get paid out on total and permanent disablement. It’s a total and permanent disablement benefit,” the note stated.
“‘Any occupation’ TPD is not a failing or a failure by any party.”
“‘Any occupation’ TPD is not a failing or a failure by any party. The ‘own occupation’ definitions have only ever been available in retail or platform super products.”
Laing and Wincott also rejected the idea that group TPD policies were failing claimants, estimating that 75% to 80% of group TPD claims are paid “with the rest either not eligible for cover or not meeting the required level of total and permanent disablement for ‘any’ occupation”.
In the note to subscribers, Laing and Wincott said statistics collected by The Risk Store showed these payments in 2015 equated to $1.575 billion off the back of the ‘any occupation’, and more than $6.25 billion was paid over the past 10 years, the majority of this under ‘any’ occupation.
They also rejected claims within the article that super fund trustees were unaware of the any/own occupation issue stating that the Federal Government mandates the policy definitions in group life and trustees are required to know these details, which are also supplied to members with their fund statements.
“The terms and conditions in group policies – which have no means of controlling levels of loss without these terms – are not new and are not creeping in anywhere. They are the same sort of terms and conditions as in car insurance, house insurance and dozens of other consumer financial products that need to be made available affordably to the population,” the note stated.
“The terms and conditions in group policies…are not new and are not creeping in anywhere.”
Wincott said The Risk Store penned its response as a tool for its subscribers to address concerns raised by clients but also out of a wider concern for the lack of details in the article and the potential impact this has on consumers.
“References were made to supposed deficiencies in the TPD cover in life insurance in super as if something was missing or as if there were flaws and we felt it was trying to make something out of nothing,” Wincott said.
“We were concerned about a story speaking about negative issues that are not there and consumers don’t know the details and see media statements and believe them.”
“The end result is more consumers move away from insurance and this reinforces the cynicism towards financial services and advice,” Wincott added.
Yes its true Ms Ferguson has an anti adviser bias-she is being briefed by ASIC , Choice and the consumer law centre
The Four Corners escapade started with Ms Ferguson seeking
information to further embarrass advisers who take commission. Unfortunately
for her she quickly discovered that there were more claims issues in
superannuation which did not involve an adviser. She became aware of the
gentleman from We Waa, which involved a retired senior CBA planner from Tamworth, via a certain National Senator.
The TPD cases and the two terminal illness cases involved Comminsure
but to be perfectly blunt the insurer should have paid the terminal illness
benefits, but not in my view the two TPD claims. What really stood out in those
cases was the total inaction of the various Trustees in challenging the
decisions of the insurer – the Trustees of CARE and HESTA and the trustee
provided by Comminsure itself for the internal employee super fund should be
replaced. Trustees have the same best interests duty imposed on them in the
care of their Members, as we do as advisers. Apparently the Trustees were
nowhere to be seen in these cases and one wonders if there wasn’t a Profit Share
involved somewhere which was threatened if claims passed a threshold in a
particular period. That’s what we do not know-its time for transparency.
The facts are that Default TPD Cover in public offer super
funds is being gamed by both advisers and members of the legal profession.
Advisers with an uninsurable client that needs cover are fully entitled to
suggest to that client that they might join a super fund offering enough death
and TPD Default Cover to at least partially meet the client’s needs, at the
same time telling those clients that the test to get a TPD payout is
necessarily very tough starting from the base provided by legislation.
But there is anecdotal evidence that certain bottom feeders
of the lawyer profession are guiding people through joining a super fund and
then activating a TPD claim some months later via a legal demand. Additionally
there is now some anecdotal evidence that some lawyers are visiting
associations for people with chronic disability and carefully explaining how
those people suffering from serious diseases like MS in its early stages might
be able to obtain a TPD benefit of some size with a claim later on.
This gaming of the system will remain while industry superannuation
funds insist on offering Default TPD Cover of an attractive size. Let’s face it
$150,000 minus your lawyer’s fees is better than nothing to buy the wheelchair
you ultimately might need.
If legislative change is required then that should be done.
Somehow though I suspect the funds might like to keep the opportunity to offer
Default TPD as they see it as a point of attraction of new members
The cost of TPD in super funds will continue to increase,
the claims will come under even closer scrutiny, and the TPD definitions will
be subject to this types of “smart “actuary severity- adding advice we are now
seeing from super funds such Aust Super (rehabilitation clause) Sunsuper (
spread benefits ) and various others.
The answer is blatantly obvious – leave Default DEATH COVER
on offer BUT remove the availability of Default TPD cover so that all TPD cover
in a super fund is underwritten and therefore can be accurately costed and if
necessary declined loaded or excluded on a personal level, or reduced back to
$50,000. Oh, and BTW, take away the super fund’s General Advice Exemption and
insist that the Funds insurance PDSs ( when is a brochure not a PDS ) and
address how tough a TPD definition in super really is and inform Members of
Lump Sum Tax payable on TPD insurance benefits.
Any and own definition is not the problem. The any/own definition has been legislated on and only any is available in super. The problem is with lack of advice when it comes to insurance and the definitions which clients are stuck with by the lack of independent advice FROM DEDICATED INDEPENDENT RISK PROFESSIONALS they receive when getting policies.
You are right old risky. Get rid of the General Advice Exemption for all insurance sales whether it is direct or otherwise. This is the only way to ensure consumers are protected.
Also has anyone looked at the definitions of the Industry fund’s and some retail TPD policies.
Here is the CBUS definition for TPD:
in the OPINION OF THE INSURER, after consideration of medical or other evidence SATISFACTORY TO THEM, you’re considered unlikely to ever be able to engage in any Regular Remuneration Work for which you’re reasonably suited, taking into account your education, training and experience up to when your claim is assessed.
CBUS’s insurer gets to decide which evidence is satisfactory to them meaning that they can choose to ignore doctors statements and even if all doctors say the person is TPD they still get to make their own opinion whether or not the client meets the TPD definition. I cant see any claim ever getting paid under this definition. It is junk policy. Basically you have to be in a coma and paralysed and also deaf, blind and illiterate to claim.
Only advisers who are independent (not employed by the banks/insurers) will act in the best interests of clients. The best interests duty means nothing to tied advisers as they will sell the product they are told to sell. I cannot believe that we, the independent advisers, are targeted for all the woe’s in the industry when we are the only ones acting with a conscience and really helping the consumer and protecting them from these junk policies and the direct insurance scammers.
Without dedicated risk professionals who have access to a whole range of policies consumers will lose out and these definitions and worse will be common place.
Ben
A further point
Look at Shuetrim v TAL & Metlife
That clause “evidence satisfactory to us ” was used by TAL on appeal to decide to ignore the very latest medical evidence in support of Mr Shuetrim and his TPD claim. Court approved action, in effect
The real nasty from this case is the Appeal Court effectively decided there was no difference between the words “unable “and “unlikely “as used in a TPD definition.
Bang goes a decade of advisers being told by insurers, and research houses, AND BELIEVING, that “unlikely ” was the more generous wording
I AM ASHAMED TO ADMIT I WAS CONNED, and MISLEAD MY CLIENTS !
I tried not to drag TAL into this. All my dealings with them for retail claims have been handled beautifully. They deserve the awards they earned. The problem i have with them (as well as all the other direct/ Industry Super policies) is the General Advice clause which allows them to act in the WORST Interests of the customer.
I also had a client complain to me about being sold a policy by a dodgy guy from Spectrum Wealth Management under General Advice. These practices and the ability of people to operate outside of the Best Interest Duty are the problem with our industry. The respectable dealer groups would not allow this kind of selling and ASIC should focus on them instead of targeting individual advisers.
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