Our top story this week reported a majority of advisers support the premise that future TPD products should offer clients an option to exclude cover for mental health conditions…
- Agree (60%)
- Disagree (30%)
- Not sure (11%)
A majority of the adviser community support the premise that future TPD products should offer clients an option to exclude cover for mental health conditions.
As we go to press, just over half (57%) of the respondents to our latest poll agree with the hypothesis that future TPD products should offer this option, while 27% of respondents disagree and 17% are not sure.
As we reported last week our poll addresses one of the most prominent issues stemming from the recent TPD Round Table, namely how to address the challenges associated with mental illness TPD claims.
Given the relative lack of objectivity that applies to assessing mental health TPD claims, and the significant pressure that we understand continues to mount on increasing TPD premiums even more, one logical pathway suggested by the TPD Round Table panel was one that projects a future in which the client is offered a choice as to whether they want their TPD contract to include cover for mental health and other neurological-type conditions.
…the premium applying to TPD contracts that exclude coverage for mental illness and related conditions will be lower…
As we noted, the logic runs that – as long as the client is offered the option – the premium applying to TPD contracts that exclude coverage for mental illness and related conditions will be lower than the standard TPD policy offers which include them.
Our poll remains open for another week and we welcome your views…
With great respect to those who are reactivating this hoary old argument, we have seen this all before.
Over a decade or more ago, when it was called ING I believe, One Path introduced an optional mental health exclusion as means TO SAVE PREMIUM ON IP. My recollection is that it really didn’t reduce the premiums by any significant amount. Most sensible advisers read the wording of that “self-selectable” mental health exclusion and determined very quickly that it was written in such a way that it just about covered every possible angle that might involve some form of mental health illness. In particular the exclusion wording seemed targeted at those IP claimants who developed depression a few years after commencing a claim when it became obvious to them that full recovery was never really going to occur.
Times have changed, drastically. We now have the codification of all the common law, Corps Act law and ASIC rules bundled up into a thing called the FASEA Code.. I am not going to rattle off all the various standards that I think would be impact any adviser who foolishly chose to recommend that the client select a mental health exclusion at the time of application just to save a few bucks but the FASEA code should kill off any opportunity for advisers seeking to convince a client that it might be a good idea if they accepted the TPD alternative offered by any insurer which automatically provided cover BUT with a mental health exclusion, offered without any assessment of that risk and driven by the advice process.
Advisers are not Nostradamus, as often said by David Glenn over at TAL. And we are not doctors.
The only way I believe that such a recommendation to a client could be possible is for the adviser to send the client off to a GP and for that GP to refer the client to a psychiatrist for an assessment of the potential of that particular client to ever be diagnosed with a mental health illness. Very expensive and I don’t think you will find a psychiatrist to be prepared to make such an opinion.
This type of suggestion could only come from insurers and their overlords the reinsurer’s. They don’t give a fig about advisers, all they want is more TPD business that has less chance of a mental health TPD claim and therefore the opportunity to reduce TPD payouts. Simples !
Anyone who thinks that AFCA will not be all-over such risky advice is a fool. AFCA have recently made a ruling that an insurer has to pay a TPD benefit because the insured was never provided with an opportunity to seek a review of the spinal exclusion inserted with the client’s agreement when the policy was issued. It’s still open to contest, because the insurer has now appealed a recent Federal Court decision.
If AFCA is capable of that irrational state of mind then I fear for any adviser who appears before them where there is evidence that the adviser recommended that TPD (or IP cover for that matter) should be taken with an optional upfront mental health exclusion, just to save some premium, and where the client has now been certified post policy as having a mental health illness resulting in disability. Good luck!
And we haven’t even discussed what the reaction will be from the PI insurer’s
Hopefully this proposition from some insurers will be dead in the water. And even more hopefully perhaps all insurers could start reassessing how it is that TPD claims, which by definition require TOTAL and PERMANENT disability, are still being paid for mental health illnesses that rarely are certified permanent .
Good words Oldie. Clarifying as usual. Makes the decision to leave our once-great industry much easier for many advisers methinks, this and many other ‘couldn’t-make-this-stuff-up’ types of developments of recent times. Thanks for an enlightening read.
Comments are closed.