Guiding clients through group insurance claims

So many Aussies have default MySuper insurance now that the emerging raft of claims is biting into advisers’ knowledge and practices. Although it’s seen by the advisers willing to take on the role of assisting these claimants as normal, it’s not a role that most advisers are prepared for. The path of a claim through the industry superannuation regime is unfamiliar to many and what to do and where to go for information and advice is a new discovery process and its lack of familiarity is no doubt starting to affect productivity.

So gold stars to those who persist with their support service to these claimants, especially because this is often pro bono work. We think we can help smooth the way and save time with some broad input on what we see as the common stumbling blocks and misunderstandings.

We’re observing this from three angles:

1. Our own members seeking guidance and support;
2. LinkedIn posts and comments; and
3. Inside a few industry fund claims areas, while doing our consulting work.

The most common queries from advisers cover:

• What can I do to speed up the approval process (across death/TPD and to an extent IP)?
• Why are the funds taking a certain action (that is so different from what retail insurers do)?
• Who the heck can I talk to about an industry fund claim?
• Should we just get a lawyer on the case?

The most common areas of lack of understanding among fund members, which need explaining by an adviser who takes on the support role, revolve around:

• Why they don’t automatically qualify for TPD when they are on a disability support pension or have received a worker’s compensation settlement with a whole person impairment assessment, or have been medically discharged from their job?
• Why a husband or wife isn’t automatically receiving a death benefit from their spouse’s fund?
• Why their income protection goes nowhere near their pre-disability earnings?

It’s easy to understand why they have such lack of understanding when you consider that these members: 

• Have usually never heard of these products, let alone how they work;
• Have no experience that helps them understand different levels of disability and the difference between ongoing and one-off assessment; and
• Have never received advice on nomination of beneficiaries, despite all funds making plenty of information available on this facility.

Adviser queries we regularly see

Industry fund – and other corporate fund – insurance terms, conditions and claims operations are all pretty new to most of us. We don’t belong to industry or corporate funds ourselves and although we come across new advice clients who have default cover, we haven’t seen many claims – until now. Remember insurance cover on an opt-out basis. ‘Default’ cover was only introduced as part of Stronger Super reforms, announced by Labor in 2011 and effective from 2014. So it’s no wonder that members took a while to become aware of their cover and that claims are ramping up. Probably, fewer members are opting out as well, influenced by the growing awareness of life insurance, thanks to TV ads and promotion. Here’s some insight commonly sought:

Every fund claim (with very few exceptions where the fund handles and/or insures their own members’ claims) has to go through a few levels of processes. In brief:

• The claim paperwork is gathered, in most cases, by a fund administrator with direct contact often via a contact centre, then sent to the insurer once all requirements are received.

Bearing in mind that employer/employment records are necessary to validate the member’s eligibility to claim, there could be medical evidence on file that the insurer doesn’t see until the employer plays ball. The effect of this is that no preliminary assessment can take place until the whole file is compiled – that’s important to understand in terms of ‘delays’. Also critical is that a formal death certificate must be provided before a death claim can proceed (same as retail).

• There are increasing numbers of funds that facilitate direct claim paperwork provision and submission with their insurer but mostly this is for income protection. This is speeding up the initial assessment.
• From an adviser’s end, you will need to establish if the avenue for submission and follow-up is direct with the insurer or only with the contact centre/fund administrator claims department. If it’s the insurer, that’s easier. If it’s a fund administrator, obtain a specific name to speak with. It is common for the claim to be allocated a case manager there, as well as in the insurer. An authority will be required of course. Check with the fund first, to see if they have their own form that can apply across all the parties to the management of the claim.

The assessment for ‘living’ claims is at two levels, once the employer and medical evidence are obtained:

• Is the member eligible to claim? For example, if their date of joining the fund coincided with a period of leave for illness or injury, they may not be eligible. Premiums are refunded in these rare circumstances. This is commonly referred to as the ‘at work’ provision.
• Are they medically disabled under the relevant definition(s)? There may be several TPD definitions; the IP definition may alter after, say, two years on claim.
• This part of the process will thereafter not differ from retail. Your support can be to assist with chasing up medical reports, driving the client to an independent medical etc. See our last Risk Read for comments on claims support.

Death claims, although not subject to assessment (dead is dead), are subject to:

• Eligibility checking – it is extremely rare for a member not to be eligible for a death claim. This means almost all death claims are paid straightaway from insurer to fund, once the death certificate and proof of date of birth are received.
• The processes demanded by legs and regs around the trustee’s determination, after payment is received, as to who the benefits should be paid to. There is a raft of rules and guidelines around this, way too much to reproduce here, that many advisers have never encountered but need to be aware of, as they explain the common delays in death benefit payments from a fund. We have a detailed but plain English article on this in the store: Toolkit>Technical Articles> Navigating Superannuation Death Claims (about 10 down in the Index).

**Remember if a client is lucky enough to get to you before they have a claim, you can advise them on super beneficiary nominations that, when valid, will drive an immediate settlement of a death claim (once the beneficiaries prove their identity) and avoid all the potential for delay and family conflict.

Note: Not all funds are the same. We have tried to provide the most common scenarios you will encounter.

Suggesting a lawyer be engaged where a decision has not yet been made will achieve nothing. Here are some things to think on regarding legal input where there is no decision to take action against yet:

• The requirements are straightforward for the majority of claiming members and providing the required information in a timely manner direct to the fund and insurer is the most efficient way to set up a claim for speedy assessment;
• The vast majority of claims are paid without undue delays or any need for members to take legal action;
• Research has shown that when a member is eligible, claims involving lawyers take longer to settle than these claims take when lawyers are not involved. Third-party involvement adds time delays;
• The assessment process requires expertise in the interpretation of medical evidence. This is a specialist claims assessor’s expertise, not a lawyer’s;
• If a member is eligible for insurance cover, the amount is set down in the policy. Legal action doesn’t improve the claim beyond the eligible insured amount and any accumulated benefits (members don’t understand this);
• The use of lawyers can greatly affect the amount eventually received in the member's hands. This is a key consideration if there is a legitimate and successful claim. Yet, a lawyer is engaged when no representation was necessary.
• As most lawyers operate on a share-of-outcome basis, using them for IP will involve direct costs. You'd struggle to find a lawyer wanting to contest an IP claim for this reason.

Advisers, with your network of colleagues and places to go to get help, are the very best chance a claiming member has of navigating successfully through a claim if the claim ‘qualifies’.

Sue Laing is an insurance industry consultant and founder of consultancy firm The Risk Store. She will be expanding on this article in a future blog.