Will your life insurance claims be paid?

ASIC report into life insurance finds TPD claims more likely to be denied.

rejected insurance claim

Are you confident your life or TPD insurance will pay out should something happen to you? Well, the statistics may suggest otherwise.

Following an industry review by the Australian Securities and Investment Commission (ASIC), commissioned by Financial Services Minister Kelly O’Dwyer, it was found that one insurer denied 37 per cent of total and permanent disability (TPD) claims, while two more denied 25 and 24 per cent. But which insurers? We may never know. ASIC has issued a warning that the industry needs to clean up its act or it will start naming names.

Peter Kell, ASIC Deputy Chairman said, "Life insurance is a vitally important financial product that helps support consumers and their families at times of significant stress. Not being able to successfully claim on a life insurance policy can be financially devastating for the consumer and/or their family, so it's important that the industry operates in a way that is fair and transparent."

The review, the purpose of which was to determine if there were systematic problems with either the industry as a whole or a particular insurer, focussed on life insurance claims. It looked at the outcome of claims and disputes, as well as insurers’ processes, documentation, staffing, systems and procedures and selling tactics.

When it comes to life insurance, for the period between 2013 and 2015, only four per cent of claims were declined. It fares well when compared to claims declined for other types of insurance – income protection seven per cent, trauma 14 per cent and TPD 16 per cent.

So, what causes a dispute on a claim? Evidence and delay accounts for 47 per cent of disputes and ASIC will be taking a further look at these disputes. In future, insurance companies will also have to report the percentage of claims they deny.

There are 15 insurers that represent 90 per cent of the market when it comes to premiums collected and ASIC has put them all on notice, with more than 15 independent reviews being initiated by life insurers. ASIC will also review whether or not polices have been mis-sold by insurers issuing policies to people and companies that they knew would never be able to claim. Mr Kell said, "We identified issues of concern in relation to higher claims denial rates and claims handling procedures associated with particular types of policies," he added. 

The review also found that there were conflicts of interest in the way in which remuneration packages for claims staff had been set up, with one insurer looking at the decline rate of claims staff as an indicator of bonus payments.

The Government has also sought to cap commissions paid to planners at 60 per cent of upfront premiums paid by customers.

Industry Super Australia chief executive David Whiteley was concerned about the financial remuneration to planners and claims staff, "Quite frankly it's bordering on immoral," Mr Whitely told Fairfax.

ASIC has also recommended that tougher penalties be imposed on insurers who breach their duty to act in ‘utmost good faith’ when customers make claims on policies.

The Australian Prudential Regulation Authority (APRA) has also weighed in by sending letters to life insurers and superannuation trustees stating what it expects in regards to improvements to the oversight and handling of insurance claims. A release by APRA on Wednesday stated, “Based on information submitted by insurers and trustees, APRA has identified a number of areas where both trustees and life insurers can improve their practices to better meet expectations in relation to insurance claims.”

ASIC will today front the House of Representatives economics committee to answer questions about its performance in general. It will also respond to issues raised during last week’s banking inquiry. Labor MP Matt Thistlethwaite will be in attendance and intends to use the committee meeting to request ASIC name the insurers and their decline rate.

"We think it's incumbent on the regulator in this area to provide as much information as possible for consumers," he said. 

"This report provides no information at all for consumers about which insurers are performing well and which have rigorous internal processes to ensure they have best outcomes for customers."

ASIC has refused to release the names of the insurers as it claims its data was "not entirely reliable" 

All three financial regulators, ASIC, Australian Competition and Consumer Commission (ACCC) and APRA, will be in front of the economic committee today as a following on from the big four banks appearance before the parliamentary committee last week.

Do you have concerns about your life or TPD insurance? Have you ever had a claim denied or delayed? Does the review go far enough?

Read more at TheAge.com.au



    To make a comment, please register or login
    Tom Tank
    14th Oct 2016
    It is precisely these concerns coupled with disenchantment with the banks and financial planners that strongly suggest the need for a Royal Commission into that financial industry.
    Just because such a commission has not teeth to enforce its findings it does have the wherewithal to shine a spotlight on what is going on and how we are being taken for a ride in so many instances.
    Jilly B
    14th Oct 2016
    It is overdue this inquiry. Most people today are overloaded with Insurance polices for all types of situations. Unfortunately they all need paying and it takes a lot of money to cover the many situations one could find themselves in. This year I counted up 7 different polices I had to pay and finally decided after 20 years to cancel my Life Insurance policy which had my children as benefices as it continue to go up AD50 per month each year but the payout amount did not even go up the CPI rate. I phoned the Insurance Council before making the decision and they explained they represent the Insurance companies and NOT comsumers.
    I suggest that everyone looks also at the number of Superannuation Polices they hold as they could be being charged TPD insurance on each and every one of them and if there was a claim you may have a chance of claiming on 1 only.
    Tom Tank
    14th Oct 2016
    You certainly should rationalise your super funds as they are costing you dearly. Pick one fund, that suits you best, and roll the others into that.
    Once the kids are self supporting then why have life insurance? It is a bit of a rip off.
    Old Geezer
    14th Oct 2016
    I don't have any life insurance and haven't had for decades.
    14th Oct 2016
    I agree Tom and Jilly.

    When my husband died suddenly in an industrial accident we had life insurance and it saved the family home by covering his business loans.

    I had three young children so I continued to carry insurance to cover them.

    When they were finally not dependents I cancelled the insurance and also the insurance inside superannuation.

    This saves a lot each year and allows the superannuation to accumulate much faster.
    14th Oct 2016
    it is their responsibility to name the insurance companies NOW some of them are like the banks which with turnball was a white wash because he is mates with a lot of the top brass in the banks the same applies to insurance companies.

    14th Oct 2016
    You are walking through a mine field when looking for this type of insurance. The insurers are as slippery as eels and as heartless as most politicians.

    14th Oct 2016
    Life Insurance & TPD are claims which happen only once, and if the payout doesn't happen it is devastating for the consumer. ASIC & APRA must work for the consumer and release regularly (starting immediately) all information in a comparable manner to allow consumers to choose the right insurer. Any excuses, such as data not being reliable, needs to be fixed separately and as soon as possible, but is NOT an excuse to release all available data - hey, we the taxpayers are paying for these Govt agencies to work for us, not for these companies, and WE WANT TO KNOW WHAT THEY KNOW.
    14th Oct 2016
    Insurance companies exist to make a living insuring, but they pay their 'first contact for claims' people to try and weasel out, as the less they have to pay, the better their living standard, - this is not a good look for those wanting to be insured, ie the sum of claims paid out must be less than the income of the insurance company less it's total expenses, and it's share holder's payments etc, it is like playing pokies, the club always wins, as your losses pay for the club.
    And as with pokies, the longer you pay the less likely you will get a return.
    Recently I was approached by an insurance company to buy funeral insurance, - as I am 67 there is a reasonable chance I will live to 85 as did my Dad, - calculating the payments, which would give my daughter $5000; to cover funeral expenses etc, it would have cost $20,000; over that time, with a consequent lowering of financial freedom during that whole time, - fortunately my daughter, who will inherit my house anyway, said, "don't worry Dad, we will look after it.
    On the cynical side, she will be $15,000; better off, but so will anyone who decides not to insure, - yes if you buy a brand new car and some uninsured drunkard wipes it out, a few years of insurance are reasonable risk reduction, but after that, just let it go, as it won't be all that many years later you will have lost the money to replace your older car anyway.
    Insurance, a way to make money, your money, go from your pocket to the insurance company's bank account, the which is always hungry.
    Old Geezer
    14th Oct 2016
    Best funeral insurance is open a bank account and called it "Funeral" and put the premiums into it. At least there will be something to pay for your funeral.

    Insurance is buying a ticket in a lottery that you hope you will never win.
    14th Oct 2016
    An incredibly astute comment OG.
    Brett (no longer) in China
    14th Oct 2016
    Insurance companies and banks have had centuries to perfect the art of legalised larceny.
    Politicians are ready to take them on?
    And all our pigs are lined up, polished, and ready to fly.
    14th Oct 2016
    what about house insurance?
    14th Oct 2016
    imho, if you are in a fire, flood or similiar high risk area, initially it may be wise, but as time goes on and you understand the risks, to spend the otherwise lost insurance money on proofing your property against these risks may be far more cost effective, and it will save all your stuff, not just re-build the house, and also make your house more valuable if you choose to sell it.
    Of course some places you should not buy or build a house there.
    Also, as extreme weather events from Global Warming get stronger and more frequent, the insurance companies will protect against such claims, - in fact many have already!!!
    Old Geezer
    14th Oct 2016
    Just insure for a major disasters and forget about broken windows and other minor issues.
    14th Oct 2016
    Be aware and very alert if you have anything under ComSec. You or your family could be in for the fight of your life, trying to get them to pay out Just ask the bloke who tried after he'd had a major heart attack, died on the operating table. The insurers said he wasn't sick enough!!!!
    Old Geezer
    14th Oct 2016
    I have found ComSec good to deal with over the years.
    15th Oct 2016
    ComSec and ComInsure are different departments.
    14th Oct 2016
    Old Geezer, any company which you are giving you money to will be 'good to deal with', and present their best face, but when the biggy hits the fan is when you find out they are not as good as you thought, when they are in lock-down-don't-pay-if-at-all-possible mode, not the same face at all, - which shower did you come down in?
    Old Geezer
    14th Oct 2016
    I've had issues with ComSec over the years but they have fixed them promptly without any hassles. They have even waived fees when I have made an error. I have been using them for decades now.
    14th Oct 2016
    Yep, my late husband's insurance was denied as we had updated/changed his policy (still same insurer) but overlooked telling them he now had type II diabetes. We had the first policy for about 18 years, the second for a couple of years... Thanks to our financial adviser (? how good was he, probably just looking for some commission) who advised us to update. I immediately dumped the financial adviser, cancelled my own personal insurance and never took it out again, I've never spoken with any other financial adviser either - just don't trust any of them!!
    14th Oct 2016
    My late husband put in a claim on income protection when he was unwell and could not keep working in our company. The consultant sent out to manage the claim warned us that xxx would fight the claim all the way because it was more than a certain amount per month. How true. Ended with my husband's life insurance being cancelled by xxx after they decided we had deliberately set up our company in 2000 (because that's when ABNs were issued - company had been running since 1990) to defraud them. XXX had told us in 2000 that with the income we were making from our business we were nuts if we didn't put some estate planning and stuff such as income protection in place!!!! My husband died from AML (aggressive form of leukaemia) two years later...he had symptoms at the time of the initial claim that were not recognized for what they were..... during the assessment of the claim, we were subjected to sureveillance, harassment, financial investigation etc - you name it..... xx is one of the big four!
    15th Oct 2016
    That is just awful and is a very good reason for these companies to be named so people can avoid them. It is bad enough suffering illness and losing a loved one without this sort of angst and fraud adding to the weight.
    15th Oct 2016
    Its 12 years since this started and 7 since my husband died and I am just getting back on my feet financially. We both worked extremely hard and long hours and I still do except I take time out to smell the roses (event though I can't afford to) because you never know what's around the corner. I can laugh at some of the things that happened like the surveillance company actually being called "something 007"....and being followed into the bra section in a department store where there were only women present and the guy trying to make himself look non-obvious until a sales assistant asked him to leave.... but the things that need to change are a time frame being put around wanting to dispute anything ( it seems to be two years - well with what I went through I was just trying to survive - it wasn't until several years later that I was in a position to be able to think clearly and then try and do anything to address the wrongs related to the income protection, the cancellation of his life insurance and the settlement of his estate) and as Not Senile Yet says, the manner in which these claims are handled and investigated. It is appalling that people under stress and in situations such as his and ours are subjected to what is basically abuse and bullying with no redress when false hoods are flung at you and you are made to feel like a criminal simply because you believed someone who had sold you a product that was supposed to assist you in your time of need. We went into xxxx (one of the big 4 banks) - they sat us down after much hesitation on my part with one of their financial advisors, we bought the product and we paid our dues religiously, continuing to have them deducted whilst waiting on the outcome / handling of our claim. I didn't hear anything fom any of them when my husband died. The other thing that needs to change is that we need somewhere to go - someone to talk to - there needs to be a body that you can approach, who has some power, to say "hey, this isn't right....what can I do about it"...and don't tell me that the financial ombudsman is there ....that got me nowhere - my case did not fit their rules...
    Not Senile Yet!
    15th Oct 2016
    TPD Insurance is never just paid by any Big Insurer!
    They delay...delay...delay!
    Meanwhile expecting the claiment who is ill...obviously....to supply updated certificates and detailed information.....that is not possible if you are ill..!
    Persally had to get a Lawyer to handle it.....because they kept calling & harassing whilst i was trying to get treatment......even accused me of being un-co operative and arguementative for simply disagreeing with their views!
    Settled within months of getting a Lawyer onto them!
    Icome Protection was the same......wanted to debate the info provided....

    Inferring I was a scammer.....even with Two Doctors confirming my diagnosis.....and ongoing re-hab!
    Completely Pathetic Claims Administratots who refuse your claim.....time & time again!
    All they want to do is delay making a decision by questioning the Medical Diagnosis!
    Claims Officers are paid to simply deny....delay...then deny and delay....regardless!
    Will never recommend xxxx Insurance Company to anyone!

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