Elective surgery and other potential IP exclusions

Elective surgeries and non-essential cosmetic procedures are increasingly common.

They include breast augmentations, varicose vein stripping, knee replacements, laser eye surgery, face lifts, rhinoplasty (nose jobs), tummy tucks, liposuction, Botox and dermal fillers.

According to the Australian Institute of Health and Welfare, more than 710,000 people underwent elective surgeries in Australian public hospitals in 2015-16. It’s estimated that twice as many undergo surgery in private hospitals.

Consequently, complications arising from elective surgeries are on the up too, which can have serious implications on a person’s physical, mental and financial health, especially if they’re unable to work.

Given the increasing popularity of elective surgeries, advisers should consider the potential client impact should something go wrong and closely examine which insurers will and won’t pay a claim related to this kind of surgery when applying for income protection.

Advisers need to be very clear on where an insurer stands, in the unfortunate event that a client is left disabled as a result of an elective/cosmetic surgery.

Guaranteed renewable

Retail insurance policies today are generally guaranteed renewable, meaning that the insurer can’t cancel an existing policyholder’s policy or place further restrictions on the policy as a result of a change in their circumstances, provided they continue to pay their premiums.

Under some policies, a person can take up risky sports like polo, rock fishing and motocross without penalty, but if they undergo elective surgery and something goes wrong, they may not be covered. This, of course, depends on the policy.

This seems unfair and especially for people who elect to undergo preventative surgeries such as mastectomies and hysterectomies, or elect to donate an organ to save the life of a loved one. The possible scenarios are endless.

Don’t rely on research comparators

When using a research comparator to compare insurers and policies, it’s important to understand that insurers who exclude elective/cosmetic surgeries may have the same ‘A’ rating as insurers who either make no reference to their position or only have an exclusion for a period of time, for example, six months.

Given the critical importance of exclusions when assessing a policy, advisers may need to do some extra digging on this matter.

In the past, it was easy to see how references to elective surgery may have been overlooked but the growing acceptance and popularity of elective/cosmetic procedures, and the heightened focus on claims, means advisers need to be crystal clear on when an insurer will and won’t pay.

As is common among insurers, ClearView excludes disability as a result of elective/ cosmetic surgery within the first six months of taking out a policy, increasing cover (but only in relation to the increased portion), and from the date cover is reinstated. 

However, one insurer makes no reference to elective/cosmetic surgery. Additional research found that that insurer actually covers disability due to elective/cosmetic surgery from day one. Another insurer is silent on its position although a research note from one comparator states they “will pay if the elective/cosmetic surgery or organ transplant surgery is a result of the insured requiring the surgery as part of their treatment to alleviate their illness or injury”. 

This implies that elective/cosmetic surgery that is not medically necessary is not covered, therefore a linked claim would be denied.

Finally, there are insurers that make it clear they do not cover elective surgeries that are not medically necessary.

Advisers need to conduct thorough due diligence to protect their clients. Ambiguity is unacceptable.

Renee Hancock is head of research and development at ClearView