TPD ADL regime up for change
The so-called Activities of Daily Living (ADL) regime used by some life insurers in handling total and permanent disability (TPD) cases is being canvassed for change, following evidence given to a key Parliamentary Committee.
The Australian Financial Complaints Authority (AFCA) has told the House of Representatives Standing Committee on Economics that the ADL represented a “very tough test”.
“It really should only have very limited application, if at all,” AFCA’s lead ombudsman, insurance, John Price told the committee.
He was answering questions from the committee’s deputy chair, Labor’s Dr Andrew Leigh, who referenced a recent Australian Securities and Investments Commission (ASIC) report which suggested that claims denial rates for people under the ADL regime were close to 60%.
Leigh described the 60% number as “outrageously high”.
Later, in answering questions from Leigh the chief executive of major insurer, TAL, Brett Clark pointed to impending changes to the ADL regime.
Discussing TAL’s claims denial rate of 44% with respect to ADL, Clarke said: “Clearly there are opportunities to be better than that, and we're working with our industry and also our superannuation fund partners on what might be a better benefit design than ADL”.
“Will you commit to not relying on the ADL test as unemployment spikes? You're denying half the claims, and increasingly, as the jobless rate goes up, it's tempting to use the ADL test and keep rejecting half the claims,” Leigh asked.
Clark responded: “We're very aware of and sensitive to this issue in particular. It's important to understand, for the committee's benefit, that generally these ADL definitions will only apply after someone has ceased working for a six or 12-month period. In that intervening time, they will continue to retain their existing definition before it moves to an ADL definition. But we're very aware of and sensitive to this issue and working through it”.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
