Strict TPD definitions should be permanently scrapped

A consumer advocacy group says the FSC’s recent commitment not to deny TPD claims to people who have lost their job proves activities of daily living definitions in TPD cover are too strict and should be scrapped.

In a statement released on Tuesday, Super Consumers Australia said the industry body’s announcement that they would assess TPD claims based on a person’s employment arrangements prior to the COVID-19 pandemic being declared amounted to an acknowledgement “that TPD cover is inappropriate for unemployed people and people working limited hours”.

“Restrictive tests have no place in TPD insurance, whether during a pandemic or not. Super Consumers Australia is calling on funds and insurers to ban these junk terms once and for all,” Super Consumers Australia director Xavier O’Halloran said.

“It is good to see the FSC acknowledge there is a major problem with restrictive terms in people’s life insurance in superannuation. But, what the industry has proposed is a Band-Aid solution to a problem it knew about long before the global pandemic.”

Mr O’Halloran said similarly to worries about the looming expiry deadline of JobKeeper and JobSeeker, many fund members would still be unemployed in September when the FSC’s initiative ceased, and would therefore still be assessed under the strict definitions.

“The September deadline will see people falling off a financial cliff. The forecasts are not showing a full recovery in unemployment levels for years, not months,” he said.


“The industry’s plan will see some people caught out.

“Everyone has been doing their part to lessen the impact of this pandemic. By aligning this scheme with the end of JobKeeper, the insurance industry is piggy backing off the government's program to avoid claims payouts and then pulling the rug once the support is gone.”

Super Consumers Australia said an ASIC report from late last year backed its claims that the definitions were too strict, as it revealed that TPD claims assessed under activities of daily living tests were five times less likely to succeed.

Strict TPD definitions should be permanently scrapped
Xavier O’Halloran
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