Finance Your Super Super funds pay up on TPD claims

Super funds pay up on TPD claims

Funds are paying up on TPD. Photo: Getty
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Superannuation funds are paying up on the majority of total and permanent disablement insurance claims with most claimants receiving either a full or partial payout, and funds that look closely at insurer decisions are among the best payers.

Research from SuperRatings showed nearly half of the super funds assessed paid out between 71 per cent and 90 per cent of TPD claims between July 1, 2015, and June 30, 2016. Almost 30 per cent of claimants had 91 to 100 per cent of their claims paid, Fairfax Media has reported.

SuperRatings did not provide data on claims that were knocked back completely, but its research showed that slightly more than one in 10 claimants received 60 per cent or less of their claim payout.

The Australian Securities and Investments Commission reported in a  review that about 16 per cent of TPD claims were rejected.

SuperRatings chief executive Adam Gee said the data indicated that most superannuation funds were acting “in the best interests of their members and have paid genuine claims appropriately over the years”.

“As with any industry, there are some funds that do not always do the right thing and this has fuelled much of the media attention,” he said.

“We believe a small number of funds do not maintain enough internal oversight over insurance claims and often rely too heavily on their insurer to make decisions about the payment of claims. However, we believe that these are in the minority.”

The SuperRatings data showed that the payout ratios for income protection “were strong” with almost half the funds paying between 91 per cent and 100 per cent of claims, while 25.7 per cent of funds paid between 81 per cent and 90 per cent for the same time period.

Maurice Blackburn superannuation and insurance principal Kim Shaw told the Australian Financial Review that, although insurance in superannuation was vital to help address underinsurance, she remained concerned about the relationship between insurers and the funds themselves.

 “While their fund is charged with acting in its members best interests, the presence of a contractual arrangement with their insurer to provide insurance for their members with profit-sharing arrangements compromises their independence and creates a conflict of interest, so it is not surprising that our clients seek legal representation, even in circumstances where funds have a reasonable performance in relation to insurance matters,” she said.

The number of “recalcitrant funds” was very low within the super industry, according to Mr Gee.

SuperRatings data showed that 3 per cent of the industry maintained payout ratios on disablement claims of between 21 per cent and 30 per cent, while a further 3 per cent maintained ratios of between 31 per cent and 40 per cent.

“We believe that the main reasons for this are very tight terms and conditions within their insurance policies, limiting the eligibility of members to claim, as well as an over-reliance on the insurer’s decision, rather than any internal oversight of the claims process to question why a claim was denied,” Mr Gee said.

“With a greater focus on insurance in super more broadly, we are hopeful that the number of funds with very low payout ratios reduces over time”.

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