Have claims-handling bad habits returned to life insurance?

Life/risk advisers are adding plenty of value to protecting their clients’ interests in the face of tough claims-handling approaches being pursued by some life insurance companies, according to life insurance claims specialist, Col Fullagar.

According to Fullagar, despite the negative publicity which surrounded the claims handling practices of some life insurers three years ago, those practices appear to have returned to the industry.

What is more, he has pointed to some insurers using the Government’s COVID-19 stimulus measures such as Jobkeeper and Jobseeker to undermine the position of people on claim.

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“As part of its economic stimulation initiatives, the Federal Government has made available various subsidy payments, including JobKeeper, JobSeeker and the Cash Flow Booster Benefit,” he said.

“A number of claimants have recently had their partial disability benefits reduced or stopped as the insurer has deemed these payments to fall within the definition of post-disability, personal exertion, generated earnings.”

“To add insult to injury, one claimant was even instructed to repay many thousands of dollars of allegedly overpaid benefits as a result.”

In a column published in the latest edition of Money Management, Fullagar detailed what he regards negative claims-handling practices on the part of some insurers including:

  • Requesting additional claim proofs without providing reasons for the relevance of the proofs to the policy and the claim – a requirement under Section 8.5 of the Life Insurance Code of Practice.
  • Failing to alter an insured’s mailing address resulting in policies lapsing and claims being denied; and
  • Underpaying a claimant for several years and then compounding the error by making a lump sum catch-up payment resulting in an excessive tax bill.

Fullagar said all these sorts of practices means that the assistance being provided by experienced life/risk advisers have become invaluable to their clients.

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