Not all Personal Insurance is Created Equal

Not all Superannuation funds are created equal either, and Financial Planners… Well they are certainly not created equal. But these are stories for different posts.

When I talk to people about how their superannuation is invested, the conversation inevitably turns to insurance.  This leads to discussions about the differences between Group Policies, and Personal Underwritten Policies.

Group policies are contracts that are made on your behalf as a member of an organisation. This could be an Industry super fund or as an employee of a large company. These are different from personal underwritten policies which are contracts made on an individual basis and are tailored to you and your circumstances and requirements.

It is fair to say that not all policies are created equal and although they often share the same name, they definitely do not cover the same things.

I’ve compiled this post to highlight – if you have a group policy –  the sort of conditions and clauses you are exposing yourself and your family to. Although this list is not extensive, it does provide some insight as what you are covered for and the obstacles you could face if ever you were unfortunate enough to ever need to claim on your cover.

The most discerning and critical point about group insurance, is that they will underwrite you at the time of claim. This can causes excessive delays and even declined claims.

There is evidence that if an insurer can prove that your condition is attributed to an issue that was pre-existing, they are going block your claim. The length and cost they will go to substantiate that may surprise you, but critically, at the end of the day, you may be paying for insurance that doesn’t cover you for the things you want. The attached articles, highlight other circumstances where the insurer believed that the terms of the policy were not met and payments could be withheld.

The following articles are not the most reassuring clippings you will read all day, some test the principles of logic and others beggar belief.

Devils in the detail in super life insurance (click here for full article)

In this article we are told how Garrath Donaldson’s family and financial planner have been in a 9 year dispute over a life insurance claim with REST.

The defence in this case is that the members balance fell below the minimum level which negates any insurance policies. Garrath Donaldson’s super balance was $1200 and no contributions had been received for at least 62 days. This is despite him paying premiums and rest sending him statements until he died in 2007.

An investigation by Fairfax Media in this story, reveals that a number of Super Fund trustees have recently been renegotiating life insurance contracts, forcing some Super Fund trustees to accept a massive hike in premiums or trade away some of their member’s rights.

Lost ground

Here are a couple of examples of the changes that are being made to group policies that legal experts have flagged as being of concern:

  1. Changes to what sort of work a person must be incapable of doing before they receive a payout, for example, instead of being unable to perform a suitable job given their background, qualifications and work history, they must be incapable of performing “any” other job for which they could be trained.
  2. New proposals to pay TPD claims in instalments, with the claimant needing to requalify every time to receive the next sum.
  3. Unusual exclusions; for example, disablement caused by accidental injuries or illness, which would exclude injuries caused by assaults.
  4. Harder words about what constitutes TPD, for example, instead of the person being “unlikely” to be able to return to work, they must prove that they are “unable, ever” to return to work.

The fine print

MTAA Super – which kicked off a new deal with MetLife Insurance in March 2015 – members must be “unable to ever” engage in work for which they could “become reasonably suited by education, training or experience”. This is opposed to the standard definition of a person being unable to work in their own or any occupation for which they are suited by training, education, or experience.

This effectively mean that if you are able perform a task like, picking up a telephone, you will have difficult claiming on your TPD policy.

Rest Industry Super withheld paraplegic woman’s disability insurance (click here for full article)

Garraths story is replicated in this article published about a woman’s claim on her Total and Permanent Disability cover.

In 2012, a young woman suffering psychosis, walked off a balcony and become a paraplegic. The underwriter disputes the claim and withholds the payment.

They contests, as per their Product Disclosure Statement, members are not covered 72 days after they stop working for a contributing employer and the policy is invalid when a former employee has less than $3,000 in their account.

In this case, the young woman had $1500 in her account and was still having premiums deducted 3 years after she left her employer in 2010.

A lawyer was engaged and in 2013 the claim was rejected. In 2016, 4 years after the accident, Fairfax contacts the related parties and the matter is resolved and claim paid.

Sunsuper TPD insurance change: fund says 6 year payout scheme to help members but Watson Lay says problems loom (click here for full article)

The change in terms here means that those claiming on their TPD will have to apply for a portion of their entitlement over 6 years. The article states a person under the six-year regimen will be tested each year and have to undergo rehabilitation. The investigation suggests some, but not all, super fund trustees have given too much ground in these crucial negotiations.

My life turned into a nightmare: dealing with worksafe’s insurers (click here for full article)

And finally 3 case studies that highlight the difficulties in dealing with a prominent workplace insurance company and the stress and anxiety that comes with it.

The good news is, this can be avoided. We provide industry leading opportunities and strategies for clients that will give you access to retail insurance at a price that is comparable to group cover. As a fee for service practice, we dial down the insurance commission to zero, meaning. This means we do not receive any payment from the insurance company for implementing a new policy with them… Ever.

And remember, if you have any questions, feel free to get in touch via our contact us form.

Daniel Twentyman B.Bus.(Eco) Dip.F.S.(FP) Financial Planner – Authorised Representative