Research released by Super Consumers in early July found that 30 of the 32 insurance policies (94 per cent) from Australia’s biggest superannuation funds contain restrictive definitions of TPD that apply the ‘activities of daily living’ ADL (or similar) test on the basis of work status.
Corporate regulator ASIC has found that claims assessed using an ADL test are 5 times more likely to be rejected. It also found that 77 per cent of mental health claims were rejected when an ADL test applied, compared with 15 per cent when the standard test applied.
To successfully claim on a policy that uses an ADL test, a person must show they can't do two basic physical activities such as speaking, walking, eating, dressing or using the bathroom.
“The practical impact is people with a mental health condition can’t claim on this insurance when they need it most. It’s clear these terms disadvantage people with mental health claims and are designed to protect insurer profits”, says Super Consumers Australia director Xavier O’Halloran.
Public Interest Advocacy Centre noted it has concerns that the insurance discriminates against people with a mental health condition.
"Excluding people from protection because they have a mental health condition is unacceptable,” senior solicitor Ellen Tilbury noted.
“We've seen insurers do it before by imposing overly broad mental health exclusions. The use of ADLs is another attempt to deny adequate cover to people with a mental health condition," Ms Tilbury says.
Clinical neuropsychologist Dr Jane Lonie says ADLs are “totally inappropriate” for measuring the occupational function of people with mental health conditions or injuries causing cognitive impairment.
"I am very concerned about the practice of using ADL tests to measure whether people with these conditions can hold down a job," says Dr Lonie.
The Financial Services Council has agreed to temporarily waive discriminatory terms until 1 January 2021 due to the global pandemic. Super Consumers maintain that ADLs should be ruled out for good.
“Insurers and funds have a duty to act in members’ best interests and to ensure that their services are fit for purpose. Making people pay full price for insurance they can’t claim on doesn’t meet that purpose, these terms should be removed altogether,” Mr O’Halloran concluded.
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