In a statement released on Tuesday, FSC chief executive Sally Loane said the council would ensure that if people lost their job, were stood down or had reduced working hours due to COVID-19, this would not affect their total and permanent disability (TPD) cover if it was held through participating life insurer members.
Ms Loane said the announcement had come off the back of concerns that insurers would use stricter definitions to assess future TPD claims for policyholders that had become unemployed or underemployed during the crisis.
“A claim for TPD is assessed on whether the person is expected to be able to work ever again. For this reason, the TPD definition used to assess a claim is based on the person’s recent working arrangements,” Ms Loane said.
“Typically, this depends on the number of hours the person was working and whether they were in casual work before the illness or injury happened. Broadly speaking, the fewer hours you work, the stricter the definition used to assess your TPD claim.
“For most people, changes to TPD definitions happen only after their working arrangements have changed for six or 12 months (to cover parental leave, for example). For others, this change can happen after three months, depending on the particular policy wording.
“What this means is that some Australians who lost their job, were stood down or had reduced working hours due to COVID, could see their TPD coverage change from 11 June 2020.
“To address this, today’s announcement ensures that if you make a TPD claim resulting from an illness or injury occurring since the pandemic has started, participating life insurers will assess your claim based on your working arrangements as at 11 March 2020 – the date when COVID-19 was declared a pandemic – meaning you keep the cover you had based on your working arrangements before the COVID pandemic declaration.”
The initiative comes following scrutiny of insurers by the House of Representatives standing committee on economics earlier this month, particularly around activities of daily living tests and how they would be used by insurers to assess claims in a post-COVID environment.
Responding to questions from the committee, TAL chief executive Brett Clark said at the time that insurers were “aware of and sensitive to” the impact of spiking unemployment on ADL tests, and were working on a “better benefit design” with the industry and super funds.
Will no one rid us of this troublesome lobby group, the FSC.
Ms Loane is once again demonstrating the irrelevance of this mob. Firstly she states says “A claim for TPD is assessed on whether the person is expected to be able to work EVER again. For this reason, the TPD definition used to assess a claim is based on the person’s RECENT working arrangements,”
The key words of the ANY occupation TPD definition are “unlikely”, “ever”, “experience”, “education”, and “training” (including retraining). Any permanent disability assessment on an ANY OCCUPATION TPD claim is thus based not only on “RECENT” work but also the likelihood of FUTURE WORK CAPACITY.
The matter of a fund member’s RECENT employment status strictly relates to whether or not the fund member has become a CASUAL employee since becoming a member, whereupon the TPD test becomes the more severe ADL, not the super standard ANY occupation test.
This automatic change to the ADL test by some Trustees and some insurers often has nothing to do with the number of HOURS being worked – it is triggered by a detected change from permanent employment to “casual “employment. Recent cases have shown a member could have been in a 40 hour per week job on a permanent basis, and then become tempted by an offer of an increase in salary of around 20%, if the job became casual. Neither his employer nor his superfund ever advise him of the consequences of casualization, and that extra 20% seems attractive. It’s too late when the member eventually finds out, when a TPD claim is lodged.
Ms Loane’s member insurers, in assessing which TPD definition is to apply in a particular TPD claim, need to be able to discriminate between a permanent worker who becomes CASUAL on preference, but still works the same hours, as against someone who joins an employer and is only working “on demand” – say 15-20 hours per week.
Ms Loane should be demanding her insurer members develop TPD definitions with more flexibility. She should also demand from her insurer members that they look past temporary changes in employment status or reduced hours which have occurred as a result of COVID-19.
The reference to COVID-19 is a distraction, probably made in an effort to improve the public image of life insurers in times of crisis. Recent attempts by some retail insurers to restrict new cover to exclude those who might be exposed COVID-19 have left a nasty taste.
I hereby nominate to be Ms Loane’s life risk advisor.
“The initiative comes following scrutiny of insurers by the House of Representatives Standing Committee on Economics” In other words the FSC would not have made this change without being forced to do so. The FSC is just a lobby group to profit insurers. Its time the FSC were disbanded and insurers just regulated directly without profit lobbying