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Media Release: Total and Permanent Disability Cover – a total mess

The Financial Rights Legal Centre has called on the life insurance sector to clean up its act following the release of a damning report by ASIC into Total and Permanent Disability (TPD) claims in both direct life insurance and life insurance in superannuation.

The report, Holes in the safety net: A Review of TPD insurance claims, found that TPD insurance includes narrow definitions that lead to high decline rates. In the case of cover that this includes “activities of daily living” definitions three out of five, or 60% of claims assessed are declined.

“ASIC’s report confirms the experiences many of the issues we see on our Insurance Law Service practice,” said Financial Rights Legal Centre’s Director of Casework Alexandra Kelly. “We routinely hear from consumers navigating the complex, opaque policies confounded by definitions they struggle to understand or locate let alone meet.”

“TPD insurance is critical cover relied upon by people at the lowest ebb of their lives. It is appalling that TPD claimants – some of the most vulnerable people in our community – have been treated with such disdain by life insurers and superannuation trustees.

“For superannuation trustees negotiating these agreements, I ask this question: Are you really looking out for your members’ best interests? What use is the insurance at all if you no one can claim on it. That does not meet my definition of serving the best interests of your members and it does not meet community expectations.”

“It is also disappointing that while the Government is about to introduce legislation to apply the unfair contract terms regime to insurance, the exposure draft has carved out TPD and other insurances obtained through group policies such as superannuation. This report demonstrates clearly the need to apply the unfair contract terms regime to this product.”

The report also found that poorclaims handling processes contributed to some consumers withdrawing their claims. One in eight, or 12% of claims lodged with insurers did not proceed to a decision.

“This is further evidence that the royal commission recommendation to remove the claims handling exemption must be implemented as soon as possible and that superannuation trustees and outsourced providers be subject to this oversight.”

“The Insurance in Superannuation sector continue to serve consumers poorly through the lack of any effective standards and a weak, voluntary Insurance in Super Code of Practice. The sector needs to shape up and, in line with the Hayne recommendations, introduce a strong, mandatory, enforceable industry-wide Code of Practice.”

Finally the ASIC report found that insurers lacked key claims data to help them effectively manage the risk of consumer harm – including being able to identify the value of products to consumers and key friction points in their claims handling processes.

Ms Kelly said: “The lack of data held by insurers on their own product lines is a source of constant bewilderment to us. For a sector steeped in data it is beyond credulity that the industry cannot collect this data on their own product lines. ASIC must intervene here to force the sector to improve their standards here.”


For further information contact Drew MacRae or 02 8204 1386

About Financial Rights

The Financial Rights Legal Centre is a community legal centre that specialises in helping consumers understand and enforce their financial rights, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals about a broad range of financial issues. We operate the Insurance Law Service which provides advice nationally to consumers about insurance claims and debts to insurance companies. Financial Rights also operates the National Debt Helpline in NSW, assisting consumers experiencing financial difficulties. Financial Rights took over 25,000 calls for advice or assistance during the 2017/2018 financial year.

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