Declined TPD claims need to be addressed

The Australian Institute of Superannuation Trustees (AIST) has welcomed the corporate regulator's commitment to further investigate the variation in declined total and permanent disability (TPD) claims.

The Australian Securities and Investment Commission's (ASIC's) report into the life insurance sector of claims handling found life insurers identified the variation in declined claims among insurers for TPD were seven to 37 per cent.

AIST chief executive, Tom Garcia, said: "Insurance is a very complex product, arguably more so than superannuation".

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"There are many factors involved in the claims handling process so it's vital that we have a better understanding of the underlying drivers behind such apparent inconsistencies," he said.

"Where members are not getting value from their insurance, or worse, not getting pay outs that they are entitled to, this must be addressed."

Garcia also welcomed ASIC's recommendations to establish a new public reporting process with the Australian Prudential and Regulation Authority (APRA) and to strengthen the dispute resolution framework about insurance.

He noted the Government's decision to introduce caps on commissions for financial advisers selling life insurance outside super was also a move in the right direction.

"Wherever insurance is sold, consumers have a right to expect that the way it is sold and the way the claims experience is handled meets best practice standards," Garcia said.

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In spite of the bleatings from the unions and their ambulance chasing lawyer friends, there is nothing sinister in high TPD claims denial rates. Most of the denied TPD claims are from people who would be able to claim on income protection if they had it. But when they don't, they try to claim on TPD instead even though they don't meet the claim conditions. Often the only reason they have TPD is because it came as a default in their super.

This is not generally an issue for people who have received insurance advice. Advisers know the limitations of TPD and set client expectations accordingly. They know that long term income protection is a far better option than TPD in most cases, and they know that default insurance in superannuation is nearly always poorly matched to the members' actual requirements.

Well said... When someone doesn't have Income Protection and cant work for 6 months the first thing they may do (after panicking about not having insurance) is hope and pray they are covered by their TPD policy and submit a claim.

Unfortunately, a default 'any' occupation TPD policy requires them to be unlikely to ever work again in their current occupation or one they are reasonably suited... Being off work 6 months doesn't meet this definition and the claim is denied.

Wouldn't surprise me if it were TPD claims being denied from Aus Super (TAL)... 2 million members and crap TPD will probably provide a spike in claims being denied.

Well yeah, their change in TPD definition a few years ago is nothing short of criminal in my opinion.

If so many claims are being declined and this is such a big problem why are TPD rates skyrocketing and Industry funds are weakening their TPD definitions to make claims harder? Some now require you to be unable to work in any occupation which you can be reasonably rehabilitated into.. you think decline rates are high now.. just wait.

We know the funds get kickbacks oops I mean cough cough profit sharing from the insurers for "claims experience" so this is kettle and the pot stuff from trustees. They are really very seriously conflicted, way more than people selling insurance for a company outside super, at least the claim experience has nothing to do with our ongoing payments! We want the clients to have successful claims, it dosen't hurt us financially as advisers, BUT it hurts the funds dosen't it as we know with these conflicted payments for "claims experience" . What a load of codswallop coming from the trustees on this! ASIC wont touch it as they are too scared its too much work for them and in the meantime we get slandered over the press for this fantasy strategy of churn that no one can even prove or provide real life examples of. Worlds gone crazy I tell you.

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