Insurers won’t deny TPD claims due to COVID unemployment: FSC

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.