Dealing with the death of a loved one is traumatic enough, without having to factor in the processing periods for life insurance payouts for affected family and friends – so why does it take life insurer AMP eight months to process such claims when other insurers usually only take one?
The question comes after yesterday’s naming and shaming of AMP Superannuation at CHOICE’s Shonky Awards, an annual awards program for Australia’s worst products and services.
In the announcement, it was noted that AMP’s life insurance – as offered in its superannuation products – has some of the longest delays in claim processing, compounding its woes around the erosion of inactive or “zombie” superannuation accounts through service fees.
Speaking after the awards presentation, Cameron Sinclair, the senior policy adviser at Super Consumers Australia, told nestegg that the company’s delays in processing life insurance is “a whole different kettle of fish” to the heavily publicised million-plus zombie superannuation accounts AMP has on the books.
“When someone dies, you have a default death insurance in your superannuation which is designed to go to your beneficiaries, pay off your liabilities, help your partner with the mortgage, what have you,” Mr Sinclair said.
“The average processing time for a death claim in the superannuation system is one month – and that’s pretty reasonable,” Mr Sinclair said.
He said in the instance of companies such as TAL and AIAA, when filing for a death benefit “you’ve got to get a death certificate, you’ve got your verifications, you’ve got to deal with estate issues and lawyers, you’ve got to pay for a funeral, all these things – one month is pretty reasonable and it is the average”.
“And AIAA and TAL are dealing with significantly more claims every month than what AMP are,” the policy adviser added.
In contrast to the one-month industry average, Mr Sinclair said “AMP takes 8.4 months on average to process a death claim”.
“Imagine if that was your family – if it was your mother that had passed away and you, your brothers and sisters were trying to pay for funeral costs, to settle the estate, deal with the bills and whatnot, and with the income that wasn’t coming in, and you are made to wait an average of 8.4 months.”
It’s of serious concern for Australians who would have to deal with the fallout of a family member’s death, especially since recent research from Deloitte Access Economics and Compare the Market found 13.4 million Australians don’t have an emergency fund to fall back on.
Another piece of research from Budget Direct has shown that less than half of the Australians surveyed (45.4 per cent) could cover an unexpected $1,000 emergency expense themselves, and more than half of respondents (55.5 per cent) would only be able to cover living expenses for a three-month period if they lost their source of income.
Even more outrageously, 18 per cent of AMP’s death claims take more than one year to process.
For the rest of the industry, Mr Sinclair said only 1 per cent of claims are still ongoing after a year, which does seem “pretty reasonable”.
He said you do have complex estate cases and contested causes of death, but “18.4 per cent is pretty egregious”.
“The sceptic in me goes back to raise that question – ‘is this delay a bit of a plan that AMP have designed?” Mr Sinclair said.
“AMP will say that they pay out on a high proportion of claims, but it’s pretty hard to argue whether or not someone’s dead.”
AMP has in fact responded to its receipt of the Shonky award and indicated that “AMP Life has one of the highest claims acceptance rates in the industry”.
It said it pays on average more than 95 per cent of all claims, and in 2018 noted it had paid $1.21 billion in Australian insurance claims, but did not specify the breakdown of claim types made or the proportion that directly related to death.
From Mr Sinclair’s perspective, “I think it’s pretty hard to reject death.”
“Our concern is that the reality is, if you’re talking about a couple of hundred thousand dollars in a death payout, and you’re systematically delaying those sums across the group, you are talking about tens of millions, if not hundreds of millions of dollars of capital, that AMP can keep for as long as possible and earn returns on that capital,” he outlined.
“If they’ve got it, they’re earning; as soon as they hand it out to the beneficiary, they are not earning.”
It’s a more rosy sentiment regarding company practices from AMP itself, which has said “it continues to invest in improving its claims handling generally, particularly around time to decision for customers”.
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