Insurance policy confusion

Insurance law experts have called on insurers to address the confusion surrounding the definition of permanent disability in insurance policies.

TurksLegal financial services partner Alph Edwards said unclear language at critical places in insurance policies means it is harder for insurers and trustees to administer them, resulting in unnecessary costs to consumers.

“Currently, the wording in many life insurance and superannuation policies with cover for total and permanent disability (TPD) is causing lack of consistency and uncertainty for all involved — courts, insurers and consumers,” he said.

“Insurers and super trustees need to clarify this immediately.”

According to Edwards, the latest NSW Supreme Court decision (Mabbett v Watson Wyatt Superannuation & Anor) highlighted the need to address the issue.

While the court confirmed that the correct date for assessing the likelihood of an applicant’s future return to work is six months after leaving a job due to injury, a previous judgement suggested the correct date was when the insurer came to assess the claim.

“Here’s a case where the judgement is totally at odds with another judge’s decision on essentially the same thing… It’s not the judge’s fault. It’s a fundamental lack of clarity in what they are being asked to interpret,” Edwards said.

“This decision throws out a challenge for life insurers and super trustees to think about the words they use in their group life policies and make the necessary changes to make it absolutely crystal clear how you go about assessing TPD, including this time issue.”

Edwards said this was just one of several traps inherent in the definitions and that needed urgent attention.