A ruling by the NSW Court of Appeal clarifying definitions around total and permanent disablement (TPD) is a big win for life insurers, according to a leading insurance expert.
The Court of Appeal found that a former truck driver – who was unable to work due to injury and retrained as a part-time taxi driver – did not qualify for TPD benefit as retraining was within his existing education.
“The ruling has already received a very positive reception from the life industry for two reasons,” Lisa Norris, life insurance expert and partner with specialist law firm TurksLegal, told InvestorDaily.
“Firstly, it clarifies the issue about reasonable retraining. Secondly, the decision clarifies that an insurer or superannuation trustee can reasonably refuse a TPD benefit when a person is able to work part-time.”
Ms Norris said that if the claim had been successful, it could have opened the way for many more marginal claims and put further pressure on insurance premiums.
She added that TPD claims have seen an upswing in recent years, which has resulted in premiums paid by members also increasing.
TAL managing director Jim Minto said that marginal claims often become blurred around the definition of ‘own occupation’ or ‘any occupation.’
“The sustainability of life insurance is a really important thing,” Mr Minto said.
“Life insurers try to be fair and meet the definitions, but if business is just wildly extravagant, they’ll just end up paying far more claims and prices to customers will go up.”
Mr Minto said that it is important that TPD insurance is able to compensate people who are genuinely unable to work again in a related industry.
“You try to target people with real needs who are affected by major health issues and can’t work again,” Mr Minto said.
“The Court of Appeal has done a straight up and down decision as I read it, trying to preserve the true economic purpose of life insurance.”
