The group life insurance industry – the one that automatically covers 12 million Australians as part of their superannuation – has been slammed by a consumer advocacy group for being “rife with delays and time-wasting” in the event of member claims.
Unlike other forms of life insurance, group life insurance is “universal”, a way for Australian employers to provide basic life insurance to workers, including total and permanent disability (TPD) cover through superannuation.
Super Consumers Australia has said that delay in claim handling is the second most common complaint around superannuation, according to the Australian Financial Complaints Authority, and indicated there have been suggestions that “this is deliberate on the part of the insurer, who can make more from hanging onto the money than paying out quickly”.
It has outlined six separate ways in which insurers and the super funds themselves are delaying group life insurance claims: “drip feeding” information requests, doctor shopping, slow responses, personnel changes, not passing on of paperwork, and dragging out final calculations and payments.
According to Australian Lawyers’ Alliance’s Josh Mennen, “Delays in insurance claims is as old as insurance itself.”
“There’s two rules in insurance.”
“Rule number one is: ‘Don’t pay unless you have to’, and rule number two is: ‘If you have to pay, write the cheque very slowly’.”
Financial hardship, strain on relationships and families, distraction from treatments and recovery in the case of illness or disability, as well as worsened mental health, have all been cited as harms that can be caused by processing delays in group life insurance.
“Whatever the reason for this delay, it has a massive impact on the lives of claimants, who are already in a vulnerable position,” Super Consumers has stated.
According to Super Consumers Australia director Xavier O’Halloran, “Poor claims processes take a huge toll on people’s mental health and in many cases compounds the underlying harm.”
He said, “Australians are paying thousands of dollars for peace of mind, which for too many turns into panic when they enter the claims process.”
Super Consumers Australia said that despite the enormous impact it can have on people’s lives, “the handling and settlement of insurance claims is currently not covered by the definition of ‘financial service’”.
“We are calling on the industry to do better, but as commissioner [Kenneth] Hayne found, the law needs to change to ensure people are treated fairly in the claims process,” Mr O’Halloran said.
“We need to remove the current carve-out insurers have from acting efficiently, honestly and fairly in claims handling to protect people from delays and time-wasting.”
It follows nestegg’s coverage of the “egregious” eight-month delays on life insurance payouts at AMP.
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