Two of our clients recently appeared on 7.30 to discuss the ongoing battle with their insurer about the delays they experienced with their total and permanent disability (TPD) claim. The insurance company used delaying tactics to drag out their claims process. Although this behaviour is unacceptable, it's an unfortunate reality facing many claimants. So, exactly how long should a TPD claim take?
What can you do if you find yourself in a similar situation and your insurer is dragging its heels?
Understanding the TPD claims process
Anyone who’s stopped working as a result of injury or illness may have a claim for a disability insurance benefit through their superannuation fund.
To make a claim with your super fund, you need to complete and submit an application, including medical forms from your treating doctors. These forms can be long and complex, and the insurer is unlikely to help you build and strengthen your disability insurance claim.
After you lodge your claim, insurers usually make a number of additional inquiries and can request additional information. This part of process can also be lengthy and stressful if you’re living with a disability and under financial pressure because you can’t work.
Keep in mind that it’s always better to submit a claim with your super fund as soon as possible after you stop working. However, you can submit a claim years after you stopped.
What’s the hold-up?
While insurers are entitled to a reasonable period of time to assess a claim, they often drag claims out due to slow administrative practices and by requesting information on a piecemeal basis. It’s no secret that insurers are in the business of collecting maximum premiums but paying minimum claims, which can lead them to unreasonably delay claims assessments.
If this happens to you, seek legal help. In our experience, unrepresented claimants can have their disability insurance claims dragged out for years.
Take, for example, Rebecca, who suffers from interstitial cystitis (aka painful bladder syndrome), a rare and incurable urological condition. As a result, she is in constant pain and is unable to work.
Rebecca, who paid for income protection, disability and life insurance through her superannuation fund, was able to access her income protection for two years. But for the past five years, the insurer has refused to pay out her $780,000 disability claim.
Finally, after some recent television news publicity, the insurer has told us it will agree to pay Rebecca’s claim.
Scott, another insurance customer, was forced to stop working in 2013 after he received a terminal diagnosis of a rare form of leukaemia. He's been waiting two and a half years for the insurance company to make a decision regarding his $750,000 total and permanent disability (TPD) claim. Unless he receives the money, he and his wife will have to sell their home.
In Scott’s case, the insurer is certainly entitled to investigate the claim – it’s a hefty sum of money, after all. But after this long, the insurer should be satisfied with their investigation and should have paid Scott’s claim a long time ago.
Fulfilling their responsibilities
This behaviour should be called out. Insurers have an obligation to treat claimants with the utmost good faith. It’s unlawful for insurers to unreasonably delay or frustrate the disability insurance claims process. They should also make any requests for information, such as sending a claimant for a medical examination, as early as possible. If they don’t, it may be a breach of the law and can entitle you to significant penalty interest.
Insurers are also bound by a code of conduct that requires them to make a decision concerning a TPD claim within six months. However, this time frame may be extended if the insurer can show there are ‘Unexpected Circumstances’, which is defined very broadly.
Super funds also have an obligation to their members to respond to enquiries within a reasonable amount of time. If you have trouble speaking to someone at your fund, or it’s taken days to hear back, it’s a good idea to consider seeking legal help to escalate your complaint.
Three steps to stopping delayed TPD claims
To make sure insurers and super funds stop using delaying tactics, the following three things need to happen:
- The code of conduct for insurers needs to be binding on super funds and should include hard time frames on funds and insurers.
- Penalty interest rates must be increased. The life insurance industry currently makes, on average, more than 12% interest on its capital reserves. However, when insurers have to pay penalty interests for unreasonably delaying payment of legitimate claims, those penalties are just over 6%. This provides an unacceptable financial incentive for insurers to delay payments.
- Insurers need to remember their obligations to their premium-paying customers, and super funds should work hard to make sure the insurance arrangements in place for their members are truly serving those members.
If you think your insurer has delayed your disability insurance claim, find out what your rights are by contacting Maurice Blackburn Lawyers today.