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Case Study

“This case really highlighted the importance of understanding the policy wordings and just not accepting the first answer from the case assessors because they were not that experienced, and you could tell from talking to them that they were not confident in their decisions at times.”

This story starts with highly successful, C-level, corporate executive, Bob and his wife, Anne [names changed to protect client privacy], travelling interstate to visit family for the Christmas Holidays.

While away from home, Bob received a shock cancer diagnosis - stomach cancer with a significantly sized tumour found in his abdomen.

Rather than going home, Bob and Anne took medical advice to stay where they were and commence treatment for Bob immediately.

Being a high-level executive, Bob, is well capable of analysing complex contracts. In the wake of his initial diagnosis, he read all his insurance policies and their product disclosure statements (PDS) to assess his position.

He also immediately contacted AFRM to alert his adviser, Dan Musumeci, of the situation and to get Dan’s opinion of what claims he could make against his insurance.

Bob is a long-term AFRM client with two separate insurers: one providing Agreed Value Income Protection (IP) insurance (with a 90-day waiting period) and the other providing Term Life with Total and Permanent Disability and Trauma cover.

During a teleconference in early January, Bob advised that his diagnosis was confirmed. Prior to the meeting he had flagged a number of questions to raise with Dan re potential claims, including confirmation that he was eligible for his full Trauma benefit of $225,000, plus a number of questions related to additional IP-related claims.

By this time, AFRM had already filed a Trauma claim and also started investigating an Income Protection. Accordingly, Dan and AFRM Client Service Administrator, Mandy Rozario, had almost daily phone and/or email communications with Bob as they worked through each of his potential claims.

Bob’s treating physician had declared he would be unfit to work for six months and had already commenced a round of chemotherapy that was scheduled to continue for four months.

The range of questions he had for Dan included:

  • What are the chances of an IP claim being accepted?

  • Can my 90-day waiting period be waived in the case of cancer?

  • The agreed value of the IP benefit is about half of my current income – can you explain how that benefit amount is determined and how it may be affected by any other income I receive?

  • Will my maximum Trauma payout be impacted by any IP benefit, or will my IP benefit be impacted because I have received a lump sum Trauma benefit?

  • Will sick leave payments from my employer reduce the total amount of IP benefit I receive?

  • Similarly, will be IP payments be negatively impacted by any annual leave payments or any actual hours he works during the “off work” period?

Dan was able to address most of Bob’s questions in that initial meeting, advising that the insurer had developed newer (but not necessarily better) IP policy series’ since he had initially bought the policy, so they’d need to ensure the insurer adheres to the initial 2009 policy series terms, not the current policy terms.

Bob was also curious if there might be any additional benefits he might be able to claim from his insurers?

And this was where Bob’s claims began to get a little complex to say the least, because while Dan was ensuring he and Bob had a copy of the 2009 IP PDS to refer to, there were also a range of ancillary benefits – in both his Trauma and IP policies - that were likely to come into play.

What are ancillary benefits?

Apart from the optional benefits that can be added into a policy contract at additional cost, most insurance contracts provide a range of additional “ancillary” benefits that are built into the contract at no additional cost.

Ancillary benefits can be of significant value to policyholders – and their families ‒ and that is why AFRM often recommends to its clients that they select a contract that has a comprehensive range of ancillary benefits.

Examples of ancillary benefits that various insurers may, or may not, provide include:

  • Family Member Support Benefit – a reimbursement of lost earnings if an immediate family member ceases work to care for the life insured while they are totally disabled and confined to bed requiring full time care.

  • Nursing Care Benefit – a benefit payable if, on the advice of a medical practitioner, the life insured is under the care of a registered nurse.

  • Rehabilitation Benefit – a benefit that can pay the cost of rehabilitation programs taken for the purpose of retraining or re-education in order to seek a new vocation.

In Bob’s case issues arose around the “Accommodation”, “Confined to bed” and “Special Care” ancillary benefits that were included in one or both of his policies.

His Trauma claim case assessor initially pushed back when AFRM asked if Bob was eligible for an Accommodation benefit of up to $500 per day while Bob and his wife were away from home.

“The lump sum Trauma claim itself was okay, but the big thing was around all of the ancillary benefits,” Dan said.

“The other issue we encountered was that the case managers didn’t quite understand the policy terms and they perhaps lacked a bit of experience, generally, in managing some of these claims.”

“Essentially, the Accommodation benefit allows coverage if the claimant is away from home, or more than 100km away from home. The insurer initially pushed back and said ‘no’ and then after we had a few conversations with the case manager it became clear that the biggest issue was not that they were away from home but that they were already there and on holidays (when Bob was diagnosed); and that was the issue.”

AFRM ultimately successfully argued that the wording of the Accommodation benefit contained within the policy documentation and PDS did not specifically exclude payment of that benefit if the policyholder was diagnosed while away from home on holidays and chose to stay away from home while undergoing urgent treatment.

Similar issues arose when AFRM sought to claim a “Special Care benefit” for Bob’s wife, Anne, who was also away from home, unable to work, while providing bedside care to Bob while he was recovering from each chemotherapy session.

Again, the initial push back was because Anne was not caring for Bob at home but away from home and again Dan, supported by AFRM Client Service Administrator, Mandy Rozario, successfully argued that the intent or spirit of the wording of the benefit definition should be honoured. AFRM’s argument was supported by documentation from Anne’s employer, proving she was taking time off work to care for Bob.

An issue also arose over definitions relating to the Accommodation and Confined to Bed benefits because over the course of a four-month period Bob had numerous stays in hospital for his chemotherapy treatments.

Each time he’d spend about 4-5 days in hospital and then be required by his treating physicians to spend a further four days’ bed rest at home after each treatment.

In terms of the Confined to Bed benefit, there was debate over whether only the time in hospital should be included or should the benefit include the time confined to bed “at home” too.

There was an additional question of whether that benefit was payable within the 90-day waiting period under the IP policy even though the wording in the 2009 PDS stated:

“If you are Confined to Bed for more than two consecutive days during the Waiting Period and unable to earn any personal exertion income because of Sickness or Injury, we will pay this benefit.”

There was also confusion over whether or not the Family Assistance benefit was payable during the waiting period or if it was only payable after the end of the waiting period. This confusion was exacerbated by a payment being made by the insurer in January and then later the insurer advised the payment was in fact a mistake, asking for the funds to be returned or to be deducted from later IP claim payments.

By April, AFRM and Bob received a letter from the insurer apologising for the confusion caused and providing a new and more detailed interpretation of each of the ancillary benefits and how they are calculated.

We have insufficient space here to provide a full “blow by blow” account of all the arguments and counter arguments shared between AFRM and the insurers on Bob’s behalf.

Suffice to say Bob has indeed received significant ancillary benefit payments to date on top of the lump sum Trauma payment in excess of $225,000 for his stomach cancer.

His Trauma policy insurer also provided ancillary benefits including a “Financial Advice Benefit” of up to $2,000 and an “Accommodation Benefit” to cover “the travel costs for an immediate family member who needs to travel more than 100 km to be with you while you are confined in bed.”

Bob received the maximum Accommodation Benefit possible under his Trauma policy, 30 days totalling more than $7,000.

Separately, his ancillary benefits through his IP policy realised further “Confined to Bed” and “Special Care Benefit” payments totalling more than $40,000.

So, the point is – always pay close attention to the possibility of ancillary benefits claims and know how to argue to get them paid. Or at least have an expert like AFRM on your side.

“This case really highlighted the importance of understanding the policy wordings and just not accepting the first answer from the case assessors because they were not that experienced, and you could tell from talking to them that they were not confident in their decisions at times,” AFRM’s Dan Musumeci said.

Dan said the two case assessors involved in these claims had to refer back to management numerous times throughout the claims process and subsequently conceded the points to AFRM.

Dan said any policyholder without AFRM’s support may well have accepted the original decision and would have been out of pocket tens of thousands of dollars.


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