Choice points to ‘junk’ TPD
Consumer group Choice has questioned the value of total and permanent disability (TPD) insurance inside superannuation, arguing that it can often be “junk” insurance.
The consumer group has published an article in which it effectively accuses insurers of using the activities of daily living (ADL) test to eliminate some claims and urges consumers to discover whether they will face the standard test or the ADL test.
It said it was extremely difficult to succeed in a claim where the ADL test applied “so for some people this makes the insurance junk”.
The consumer group claimed one of the main ways insurers created junk insurance was through the “hazardous occupations” or “special risk” list.
It said many of the documents provided by superannuation funds and insurers were very long and cited AMP’s insurance guide which it said spanned 95,000 words making it much longer than the first Harry Potter novel.
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Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
