AFRM Claims Advocacy’s Bruno Muraca breaks down the role that superannuation fund trustees are now legally required to embrace when it comes to serving the claims needs of hundreds of thousands of Australian super fund members – where ASIC expects superannuation trustees “…to play a robust role alongside insurers in ensuring a good claims experience for consumers…”
ASIC’s Report 633 for trustees to implement changes to claims handling is mandatory – not optional.
In October 2019, ASIC released Report 633: Holes in the safety net: A review of TPD insurance claims. The focus of the report is on improving consumers’ confidence with personal insurance claims. The report follows a review of seven life insurers, 35,026 data points on TPD claims, in depth interviews with TPD claimants (members) and a review of over 2,000 documents.
Some of the key findings relate to the themes of:
- Poor claim outcomes from the activities of daily living tests
- Friction points in claims handling leading to withdrawn claims
- Consumer harm rising from poor data
- A focus on insurers with higher than predicted declined claim rates
…the report aggressively reinforces trustee’s responsibility under the SIS Act
Whilst some findings have shared responsibility with the group insurer, the report aggressively reinforces trustee’s responsibility under the SIS Act, “…whereby trustees have a legal obligation to do everything that is reasonably possible to pursue an insurance claim for the benefit of a beneficiary.”
The report focuses on TPD claims and improvements, however it extends to applying those improvements to all types of product claims. Coupled with ASIC Report 591: Insurance in Superannuation, it is clear that ASIC expects the trustee to play a heightened role in claims handling which extends to improving the super fund members’ trust and confidence. This is not limited to advocating for members but also the overall claim experience – making it simple, timely, and transparent.
Some of the key changes ASIC expects super fund trustees to adopt include:
- Requiring trustees to understand why members are withdrawing claims
Some of the reasons cited for members withdrawing claims include:
- Onerous and lengthy claim assessment processes
- Worsening of the consumer’s medical condition during the claim process, including (re)emergence of a mental health condition
- Cost of pursuing a claim
- Embarrassment and / or privacy concerns
Given that 50% of withdrawals occur within the first 60 days of the claim being notified, the withdrawal of claim occurs for most members when they are directed to the fund’s external administrator or group insurer to commence the claim process.
The trustee has a role to play in helping the member throughout the claim process and bridging the capability/capacity challenges of their administrator or perhaps to bridge the trust deficit between the member and the insurer.
- Trustees to make the pre-assessment of the claim easier for members
ASIC cited where trustees use an active triage process when a member initially notifies their fund of their intention to claim, it is a lot more positive for members than those trustees who are less engaged.
A large part of the pre-assessment process involves educating the member about their policy and managing their expectation of the claim process (timing, requirements, forms, medicals etc). The time upfront in the pre-assessment of the claim can reduce the impact of delays, declines and future disputes.
In fact, the APRA – Life Insurance Claims & Disputes (June 2019) Report, highlighted that of the TPD claims that are declined, over 80% are because they don’t meet the contractual definition. This suggests a poor pre-assessment process where the claim is sent to the insurer but doesn’t meet the contractual definition. The consequence is a claim delay or decline, which has a negative impact on the member experience.
ASIC is looking to trustees to change and improve their current processes and refers to both Cbus and Hostplus as examples of superannuation funds that offer a dedicated claims advocate to help members during the challenging claim time.
- Requiring trustees to support a member to complete claim forms
The lack of support for members to complete lengthy and complex claim forms is seen as a barrier to consumers, especially if they are suffering a mental or physical illness. When it comes to online claim forms, ASIC believes it is unreasonable for trustees to expect members to be able to navigate the unfamiliar and confusing process of lodging a claim without assistance. In this case, the role of the trustee is to support the member in completing the claim forms.
In addition, while the tele-claims process has reduced some of the burden of completing forms, the requirement for the superannuation trustee to provide the member a copy of the completed tele-claim lodgement form and asking the member to review the detail has seen some improvements in the capture of important claim details and made it easier for members.
This was also referenced in a recent article by ASIC* which spoke about trustees having a more robust role to play in the claims handling process.
- Ensuring the insurer is being fair and reasonable with the member
The report included case studies which highlighted intrusive surveillance on claimants, ‘fishing’ by insurers and repeated requests for further medical assessments. These activities are driven by the group insurer and establishing whether these activities are just perceived or are actually occurring requires the trustee to have ongoing connectivity and engagement with the member throughout the claim process.
A trustee relying solely on an administrator or the insurer itself to maintain the ongoing connectivity with the member can often lead to a break down in member trust and potential disputes.
- Improving member communication throughout the claim process
The report highlighted that the engagement of insurers’ claims staff with members had a significant effect on the members experience, both positive and negative.
Member communication can be influenced by the trustee if they are involved in the initial and ongoing engagement with the member throughout the claim process. Often, a trustee communicating with the member of the basics of how to go about obtaining certified identification or the importance of rehabilitation can contribute to a positive member experience.
The importance of proactive, transparent, and empathetic communication needs to be a staple for the trustee/member relationship. This will help to build the bridge the trust at claim time, where a staggering 60% of members don’t believe their insurer would actually pay at claim time**.
Improving the claims handling experience for members is a theme that all trustees welcome. The challenge is that superannuation trustees are not all equal in terms of resource or structure (internal vs external administrator service), which places constraints on the trustee to meet ASIC’s expectations.
With the recent industry changes and heightened expectations of both the regulator and members, it is time for trustees to consider how their existing resources and service providers align to the new environment. Employing additional claims capability is not a solution easily implemented for many trustees, however a realignment of service providers to their capability and seeking the services of specific claims capability may be more achievable.
…all superannuation trustees should consider having dedicated claims advocates to provide support to members
A real shift in direction is the recent introduction of independent claim advocate services, providing members an alternative to lawyers and trustees an opportunity to introduce claim capability as a trustee service. ASIC has made it clear that all superannuation trustees should consider having dedicated claims advocates to provide support to members which, if delivered successfully, could reduce the need for – and potential costs – associated with lawyers.
Regardless of trustee model, ASIC’s expectations on trustees to improve claims handling practices is not optional.
At a recent meeting between AFRM Claims Advocacy and ASIC it was made abundantly clear that if ASIC remains concerned about the claims handling practices of a super fund trustee it will use its current and proposed powers (Financial Accountability Regime) to intervene.
It is therefore imperative for superannuation trustees to prepare now so that they can demonstrate their compliance at their upcoming ASIC review.
*“Lifting the Bar”, Superfunds Magazine, June 2019
**MetLife: Insurance in Super Report 2019
Bruno Muraca is Chief Executive Officer, AFRM Claims Advocacy