Opinion
Beware Sunsuper Superannuation Insurance & TPD Changes
28th Jul 2016
Sunsuper announced that from 1 July 2016, their superannuation insurance will be changing. These changes mark a radical shift in Total Permanent Disability (TPD) insurance. I briefly comment on the need for the changes and provide a summary of the pertinent changes to the TPD insurance cover.
Reasons for change
Superannuation funds for some time have cried poor about the performance of their TPD insurance product. They have blamed everyone, but themselves, for this situation. The most obvious targets have been lawyers and members seeking access to their TPD insurance.
What Superannuation funds and their insurers fail to talk about is the woefully inadequate provisioning when they set premiums. Going back 10 years, there were numerous insurers in the TPD market in Australia. Competition was fierce to win the business of the big Superannuation funds, so cheaper and cheaper premiums were being offered. Of course, the good days did not last.
Blaming the bad times on lawyers or members for seeking to claim on an insurance product provided to them is a fallacy. Sunsuper’s new tack seems to be that they are helping members return to work with these changes to their TPD insurance. The key measure of this will be in the practical implementation of the changes.
Five year limitation period
There will now be a period of five years from the date of disablement to lodge a TPD claim with Sunsuper. If the claim is not lodged within five years, there will be no eligibility to claim. Previously, there was no limitation period.
Annual payment or lump sum payment
Currently, if the TPD definition is met, the person receives a lump sum payment. They can then use this for their treatment, rehabilitation, mortgage payments, etc.
The new TPD insurance will provide an annual payment, unless the person has a severe injury or sickness, in which case a lump sum will still be provided. The annual payments will be made as six payments over five years (e.g. a $120,000 policy will be paid $40,000 initially and then $20,000.00 for the next four years).
Sunsuper have not announced the taxation or Centrelink payments implication of this change.
More importantly, what happens if the person has expenses over $20,000 for the year and is not able to work? According to the Australian Bureau of Statistics, the average monthly mortgage repayment in 2011 was $1,800.00, or $21,600.00 annually. Now add food, electricity, water, council rates, car repayments, school fees and other expenses.
This change is abhorrent. It completely defeats the purpose of TPD cover and will leave injured people worse off.
Proving TPD annually
The changed TPD definition will now require a person to show that they are still totally and permanently disabled every year. It is unclear how this will work, but important questions arise:
- Will Sunsuper require a fresh medical report every year?
- If so, who will pay for that?
- When will the decision, that a person is still totally and permanently disabled, be made?
- When will the payment be made, if still TPD?
- How will Sunsuper ensure that these annual reviews are conducted in a timely and efficient manner, so as not to prejudice those who cannot work and earn an income?
- What happens in the intervening period between the annual reviews?
The current TPD insurance cover only requires that the person prove once that they are totally and permanently disabled, if so they receive a lump sum payment and the matter is done.
Rehabilitation program
This is a major area of change in TPD policy. I cautiously applaud Sunsuper for creating a rehabilitation program. I say cautiously, because Sunsuper have not explained what this rehabilitation program is and how it will operate. However, assistance provided to people to help them return to work broadly is a commendable focus.
Note this is ‘rehabilitation’ not medical assistance. Sunsuper and AIA will not pay medical bills. It is only rehabilitation which assists in return to work that is offered.
Under the new TPD Insurance cover, Sunsuper or its insurer, AIA Australia, may require a person to participate in a rehabilitation program. Failure to participate, without reasonable medical excuse, means that no payment for TPD will be made.
Practice will prove whether this is a genuine effort to assist members or whether it will be another roadblock by an insurer to avoid paying out a TPD claim. There are too many uncertainties as to how this program will work and what budget has been allocated to rehabilitation.
Under the care of a medical practitioner
This is also a new requirement. When applying for TPD, a person must now be under the care of, and following the advice and treatment of, a medical practitioner. What this means practically is uncertain. Will it be necessary to attend a medical practitioner weekly or monthly? What if a person seeks a second opinion? What if the doctor says nothing further can be done (as is so common)?
There are a number of other changes, but space does not permit a full examination of these. I have covered only the pertinent changes. This is a significant shift in TPD insurance from one of the largest Superannuation funds, Sunsuper, and insurers, AIA Australia. The winds of change may well catch on with other Superannuation funds and insurers seeking to reduce premiums in a limited, highly competitive market, seeking to maximise profit margins. Only time will tell whether this provides some comparative benefit to their members or merely benefit their bottom line.
Greg Spidas is a partner at Carew Lawyers and practices in all areas of personal injury and total and permanent disability insurance. Greg holds a Bachelor of Laws and Bachelor of Business (Management) degree from the Queensland University of Technology. He is currently undertaking his Masters in Health Law, with a focus on the NDIS and NIIS. Greg is deputy chair of the Queensland Law Society’s Practice Management Course Committee and secretary of the Queensland State Committee of the Australian Lawyer’s Alliance.
The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).
Learn about how you can get involved and contribute an article.
CONTACT DETAILS
SEND ENQUIRY