• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / Super funds / Insurance and super / The agony of waiting: Group life insurers are pushing claimants to the brink

The agony of waiting: Group life insurers are pushing claimants to the brink

November 10, 2019 by Daniel Herborn Leave a Comment

Reading time: 7 minutes

On this page

  • Need to know
  • What is group life insurance?
  • The problem of delays in group life insurance
  • Why do group life insurance claims take so long?
  • Disputed claims and lengthy delays harm mental health
  • The risk of secondary harm
  • Payout delays can be financially disastrous
  • New powers to end harmful delay

Many Australians are still stuck in insurance processing hell.

Need to know

  • Around 12 million Australians hold total and permanent disability (TPD) insurance through their super
  • Lawyers working in the field say that super funds and insurers routinely delay and drag out claims
  • Long processing times are known to cause claimants distress, financial hardship and relationship breakdowns

What is group life insurance?

Group life insurance is the system used by Australian employers as a way of giving people basic life insurance, including total and permanent disability (TPD) cover, through their superannuation fund. This will pay out if they die or are unable to work due to injury, illness, or disability.

Unlike other forms of life insurance, group life insurance offers universal coverage without requiring people to undergo medical tests, give their medical history or be screened for pre-existing conditions. The insurer essentially makes assumptions about the likely health outcomes for all those insured.

It’s a relatively low-cost system and the cover can offer much needed financial support for people whose retirement savings would be otherwise depleted because illness or injury forces them out of work.

The problem of delays in group life insurance

Health advocates and lawyers working in the system say group life insurance is rife with delays and time-wasting on the part of both insurers and super funds.

Some have suggested this is deliberate on the part of the insurer, who can make more from hanging onto the money than paying out quickly, even factoring in any interest they may have to pay the claimant.

Are you with a top performing super fund?

Click here to compare more than 90 Australian super funds, including returns, fees, features, awards and more.

Whatever the reason for this delay, it has a massive impact on the lives of claimants, who are already in a vulnerable position.

All too often, people making claims face financial strain and their families and relationships are placed under pressure, which leads to them experiencing ‘secondary harm’ from the ordeal of the process.

Josh Mennen, spokesperson for the Australian Lawyers’ Alliance, says “delay in insurance claims is as old as insurance itself”.

“There’s two rules in insurance,” he says. “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’.”

Why do group life insurance claims take so long?

Delay in claim handling is the second most common complaint around superannuation received by the Australian Financial Complaints Authority (AFCA).

Lawyers who’ve been working in insurance for years report a long list of obstacles people face when they make a claim, which often string out what’s already a long and trying process.

Compare super funds

Read more...

Advertisement

Alexandra Kelly, director of casework at the Financial Rights Legal Centre (FRLC), says “we’ve had complaints about delay pretty consistently” through the centre’s Insurance Law Service, which has operated since 2007.

Drip-feeding requests for information

One common frustration is piecemeal requests for documentation. This is when insurers ask for information relating to the claim piece by piece, often with time passing between each request, instead of asking for all the necessary documents upfront.

The FRLC has previously expressed its concern about this practice, which is familiar to its Insurance Law Service solicitors. The centre believes such stalling is among the “unethical strategies used to drag out claims leading consumers to tire out and disengage”.

Doctor shopping

Another common hurdle for claimants is ‘doctor shopping’, which in this context means an insurer referring the claimant to multiple medical specialists if they’re not happy with the initial report. Carl Mickels, senior solicitor at Firths, says this is an inevitable part of the process.

At times, the independent medical experts used by insurers appear to have been cherry-picked to suit their needs and deny claims.

The FRLC has seen examples of chronic fatigue syndrome sufferers being referred to a doctor who has published work disputing the condition even exists. Some lawyers have even reported doctors being flown in from interstate instead of claimants being referred to local practitioners.

Advertisement

Slow responses and poor communication

Other times insurers are simply tardy to respond, fail to reply until the claimant follows up, or give ‘updates’ that only say the matter is still being reviewed.

As the claim progresses, many report a lack of communication, calls being put on hold for long periods or not being returned, documents relating to the claim not being forwarded and claimants being asked for the same information twice.

Personnel changes

Another common bugbear is a claimant being disadvantaged by personnel changes within the insurer.

“If someone’s been on a claim for a little while and the claim manager changes, there may be stagnation or delay in payment until the file has been reviewed in full,” Snowden says. “We are still seeing that (problem) quite regularly and that’s really concerning.”

Super funds also at fault

In theory, the superannuation funds act as an advocate for the member’s claim with the insurer. But in practice, they often fail to keep members up to date with where the claim is in the process, and are reluctant to engage with either the member or the insurance company.

A person making a claim for TPD through group life insurance will initially contact their super fund. The fund then passes their information on to the insurer, but there are often hassles and complications from the start.


Advertisement

“There can be a long period of time before you even know your claim has been passed on to the insurer,” Kelly explains. “That can be a very stressful and non-transparent period.”

“They’ll lose documents, they’ll sit on them,” Mickels says of super funds. “We’ve had cases where the claim is sitting with the fund for over six months. They never passed it on.”

Calculating and processing of payment

Even when the insurer has agreed to pay the claim and transferred money to the super fund, the claimant often faces a further wait. In some funds, meetings between super fund trustees and insurers may be weeks apart.

This means that people who’ve had their claim approved often face further frustration and waiting to receive their money.

Snowden says the calculation of payments can add even more time to a painfully drawn-out process. One woman her firm represented in a claim for income protection had to wait 10 months for a decision, a timeframe Snowden considers “absolutely disgraceful”. It then took another half a year before the calculation of the exact payments and offsets was finally finished and she was eventually paid.

Disputed claims and lengthy delays harm mental health

Dr Grant Blashki is a GP and lead clinical adviser at mental health charity Beyond Blue. “For patients, it’s a really stressful time,” he says of the claims process. “Some of my patients have felt there is a long delay … it’s definitely a source of tension for people.”

Internal research conducted by Beyond Blue supports this. It compiled the experiences of people with mental health conditions who’d made insurance claims. Half the respondents who’d made a TPD claim said the process had a negative effect on their mental health.

“Disputed claims and/or lengthy delays can be extremely stressful and, in some cases, may exacerbate a person’s mental health condition,” concludes another report by the organisation.

Blashki says his patients have expressed this frustration. “There often seems to be a lot of to and fro with paperwork,” he says.

For the lawyers representing claimants, this is a familiar story. Will Barsby, national special counsel at Shine Lawyers, has seen the damage done by delay.

“People often become so overwhelmed by the claims process that they often want to give up,” he explains. “This can have an impact on a customer’s mental health, often amplifying symptoms of depression, anxiety and, in extreme cases, suicidal ideation.”

The risk of secondary harm

Research around insurance claimants has identified the potential for ‘secondary harm’, which is where the process itself leads to suffering.

People who’ve gone through the process have related the trauma involved with re-telling the story of how they become injured or disabled. Often, they have to tell their story several times to insurers and medical experts.

The Australian Securities and Investment Commission (ASIC), which is responsible for ensuring super funds meet their legal obligations when dealing with consumers, has also highlighted the strain a lengthy process can exert on a claimant.

“This could lead to significant stress for the policyholder, at a time of existing distress from the claim event”, it reports. At least one super fund executive has also acknowledged that the claims process can induce anxiety.

Mennen says that the limbo can actually be worse for a client than simply having their claim denied. “While a claim is pending for a long period of time, (clients) have uncertainty. It causes stress. It can exacerbate psychological conditions. It can also make it far more difficult for a disabled person to get back on their feet and return to the workforce.”

Sarah Snowden, state practice group leader at Slater and Gordon, says that in her experience, claimants that start out with a primarily physical injury can develop broader symptoms. “12, 18 months later, we’re submitting a TPD claim for psychological and physical injury on the basis of the delay and distress caused.”

Payout delays can be financially disastrous

For people out of work and waiting on an insurance payout to make ends meet, unnecessary delay can add to what’s already a dire financial situation.

Barsby related cases of claimants being forced to sleep on couches with their young family in tow while waiting for emergency accommodation to become available, and of others having to live in their cars or a tent during the process. The FLRC told us of claimants needing to adjust the terms of their mortgage, facing foreclosure proceedings on their homes or dealing with spiralling personal debts while they wait for a resolution.

Slater & Gordon’s Snowden says the financial burden on claimants can also form a hurdle to their recovery. “We find that takes the focus off the condition and accessing treatment,” she says.

When a person with dependents suffers a debilitating illness or injury and can no longer work, everyone around them can be plunged into turmoil.

“I’ve seen people separate from their spouses over it,” Carl Mickels, from Firths, relates. “It has a devastating effect on family and children.”

Mickels says many people making claims face a combination of stressors and difficulties.

“Often someone has no money coming in, except for Centrelink and maybe workers’ compensation or income protection. They’re in a lot of pain from the physical injury and emotional pain, if you want to call it that. Add that to the delay and the claims process causes a lot of grief.”

New powers to end harmful delay

Despite the enormous impact it can have on peoples’ lives, the handling and settlement of insurance claims is currently not covered by the definition of ‘financial service’.

A consultation on removing this loophole was completed in March 2019 with the government promising the introduction of legislation before the end of 2019.

“The reasons for these kinds of terrible claims-handling experiences are clear,” says Xavier O’Halloran, director of Super Consumers Australia. “They didn’t have to act efficiently, honestly and fairly when handling people’s claims. This tied the hands of the regulator to take action against misbehaving insurers.

“At the insistence of consumer advocates across the country the Hayne Royal Commission recommended shutting down this loophole. We now await urgent legislation to ensure no more people are harmed by poor claims handling.”

Are you with a top performing super fund?

Click here to compare more than 90 Australian super funds, including returns, fees, features, awards and more.

Learn more about insurance in super in the following SuperGuide articles:

Video: Beginners guide to super and insurance

January 21, 2021

Super funds with the lowest fees for life and TPD insurance

January 20, 2021

Super funds with the lowest fees for income protection insurance

January 20, 2021

TPD insurance through super: A definitive guide

January 18, 2021

Income protection insurance through super: A definitive guide

January 18, 2021

Insurance inside super: A definitive guide

January 18, 2021

Life insurance through super: A definitive guide

January 18, 2021

Guide to SMSFs and insurance

January 14, 2021

Related topics

Insurance and super Super funds

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap