ASIC has released a report entitled ‘Holes in the safety net: A review of TPD insurance claims’ which summarises the findings and recommendations from its review of total and permanent disability (TPD) insurance in Australia.
The report reviews outcomes for consumers, claims handling practices, the role of data in managing the risk of consumer harm, and ASIC’s findings on insurers with higher than predicted rates of declined claims.
This report identifies four important industry-wide issues that ASIC says insurers and superannuation trustees must fix:
Poor consumer outcomes from the ‘activities of daily living’ test
These policies make some consumers eligible only for a narrow form of TPD cover due to their work status (e.g. non-permanent, casual or part-time employees). This narrow cover pays out only if consumers cannot perform several ‘activities of daily living’ such as feeding, dressing or washing themselves.
Frictions in claims handling leading to withdrawn claims
ASIC collected data on 35,000 TPD claims and commissioned consumer research. The review identified that insurer practices such as difficult lodgement processes, poor communication practices, multiple requests for medical assessments, and excessive delays were just some of the problems consumers found during the claims assessment process.
Consumer harm arising from poor data
Insurers had significant deficiencies in their ability to record and search for relevant claims data. Without accurate and timely data, insurers cannot identify problems in their products or processes, or determine the changes needed to address problems and improve consumer outcomes.
Insurers with higher than predicted declined claim rates
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.
ASIC says it will take further action, including enforcement action where appropriate, against insurers and superannuation trustees who fail to properly address its concerns. It will also consider using its product intervention powers to prevent harm to consumers.