Published 21 Sep 2018
Total and permanent disability (TPD) policies provide lump sum payments to people who are unable to ever return to work because of an injury or illness. The money covers medical bills, lost income and a range of others expenses that individuals may incur when they become disabled.
However, the nefarious tactics that superannuation funds and life insurance providers use to avoid paying out on TPD policies have been laid bare this month during extensive banking royal commission hearings.
The commission's task is to investigate misconduct in the financial services industry, with failings in the superannuation and life insurance industry recently under scrutiny. But what scandals have come to light?
A former McDonald's worker who was left a paraplegic after falling from the fifth floor of a building had her TPD claim turned down because her superannuation balance was less than $3,000.
The woman was a member of REST, which is the default super fund for the retail industry. She worked at McDonald's between 2005 and 2010, before commencing a role at Swan Services - a firm that became insolvent in 2013.
After her accident in 2012, the woman pursued a TPD claim that was accepted by REST's group insurer AIA. However, REST later advised AIA that the claimant's cover had ceased because she did not meet the minimum super threshold.
The $108,000 claim was subsequently denied, although the woman eventually received the money after pursuing a superannuation claim. REST has been accused of not having its members' best interests at heart and failing to adequately inform people of minimum thresholds for insurance coverage.
REST was under the spotlight again after revelations the fund rejected a man's TPD claim for post-traumatic stress disorder, which he developed after being repeatedly stabbed.
At the time, the fund enforced a policy that meant members with accounts below a certain threshold would lose their insurance coverage 71 days after leaving their employer, the Sydney Morning Herald reported.
Despite continuing to pay premiums, the man's 71-day grace period lapsed just four days before his PTSD diagnosis. According to REST, the fund's policy was later changed for better clarity and due to member complaints.
These are just two of the stories told to the banking royal commission this month, but insurers and funds regularly turn down legitimate TPD claims. Around one in six people are rejected, according to Australian Securities and Investments Commission figures.
Gerard Malouf & Partners Superannuation Lawyers provides no-win, no-fee legal support for TPD claimants who feel they have been treated unfairly. Talk to a member of our team today to learn more about our superannuation claims services.