Claims Case Study:
Originally published on 7 October 2019
“Having the right risk mitigation strategy in place really is about a couple of simple questions:
“Do we want to enjoy freedom of choice (financial freedom)?
“Or are we prepared to have our life dictated to us by circumstances largely outside our control (injury/illness)?”
At AFRM we are constantly working to raise awareness among our clients to ensure they fully understand the terms and conditions of their cover.
This is particularly important when it comes to the terms of Total and Permanent Disability (TPD) cover.
Even among advisers, it is generally assumed it is difficult to meet the definition of TPD for a successful claim but much of that assumption is based upon TPD policies that feature “any occupation” clauses rather than “own” occupation clauses.
And it is important to know that all superannuation group TPD policies are “any” occupation policies, while you can still obtain retail “own” occupation TPD policies through your specialist risk adviser.
Confusion caused by non-standardised use and definitions of both types of TPD policies have been around the industry for years.
ASIC’s 2016 REP498 Life insurance claims: An industry review [Page 77] highlighted the issue:
271: The variations between the policy definitions may be confusing for policyholders and not enable simple comparison. For example, the impact of ‘any occupation’ clauses (as opposed to ‘own occupation’ clauses) is crucial in terms of outcomes for policyholders. A policyholder with the benefit of an ‘own occupation’ clause may fall within the definition of TPD if they cannot perform their own occupation.
272: However, the same policyholder with an ‘any occupation’ clause will only fall within the definition of TPD if they cannot work in any job, and meet one of the elements…as well (e.g. be unable to perform two or three activities of daily living) to be deemed TPD. Similarly, a clause that states that a policyholder needs to be ‘unable’ to work again is significantly different to a clause that states that they need to be ‘unlikely’ to work again.
273: The details of TPD-related claims disputes we have examined illustrate the complexity of these claims and the various criteria that a policyholder needs to meet to fall within the definition of TPD…
The purpose of this case study is to illustrate how taking out retail “own” occupation TPD cover can make a hugely positive difference to your [or your client’s] life if you suffer an injury at work.
It is a living example of how a client can not only successfully claim on TPD but can also go on to have a rewarding and successful new career thanks to the financial boost provided by having the appropriate type of TPD cover in place.
Tom [name changed to protect client privacy] was referred to AFRM by his accountant in 2014. In his mid-30’s, Tom was working full-time as a cabinet maker and on the side, he operated a part-time photography business.
After reviewing his circumstances, AFRM confirmed “own” occupation TPD cover was the best form of TPD cover for him based upon his full-time role as a cabinet maker.
In 2017, Tom contacted AFRM seeking advice about significantly changed circumstances in his life. He had been made redundant from his cabinet-making role, money was tight, and he was considering cancelling his insurance cover as a “luxury” he could no longer afford.
After consultation with his AFRM adviser, Tom’s cover was not cancelled. AFRM’s unique level of insurance product knowledge allowed us to modify Tom’s TPD arrangements to best suit the circumstances he found himself in.
His new TPD cover was converted to a “split” ownership structure to allow the bulk of premiums to be funded from Tom’s superannuation, while preserving the “own” TPD definition within his policy.
A few months later Tom was working again full-time but not too long after starting his new role he badly injured his shoulder at work. As a workplace injury, WorkCover was helpful and supportive, assisting him secure an alternative role on “light duties.”
About six months later, in 2018, Tom once again was in touch with AFRM to conduct a review of his risk mitigation cover. During Tom’s review meeting with his AFRM adviser, he informed AFRM for the first time that he had had the workplace accident six months prior and that he had been told by doctors he would never be able to return to his former role.
Amid a Workcover claim and seeking legal advice against his employer about the accident, it had never even occurred to Tom that his retail life insurance portfolio might be of assistance in his current circumstances.
AFRM subsequently managed filing a claim, on Tom’s behalf, on his TPD cover.
Despite continuing to work productively in two roles (his revised “light duties” full-time role along with his part-time photography business), the “own” occupation status of his TPD cover allowed him to successfully claim “total and permanent disablement.”
Again, the only reason he could do so was because he had “own” definition TPD. The claim assessment criteria were against his likelihood of ever again performing his original role as cabinet maker. Doctors had already told him he wouldn’t be able to do that again and so after gathering and submitting the relevant medical reports, his insurer accepted the claim.
Soon after, an “emotional and rather stunned” Tom learned he had just been paid a claim well in excess of $200,000 that would be deposited into his bank account within the week. All of this was made possible thanks to good advice ensuring he had the right retail cover terms for his individual set of circumstances.
The welcome additional funds had a major impact on Tom’s life. He had not been enjoying his new “light duties” role. The injection of funds relieved Tom’s financial pressures and allowed him the opportunity to focus more on his creative passion of photography and to grow his photography business, such that it is now his primary vocation.
Tom’s shoulder injury continues to inhibit what he can do physically. For example, it substantially restricts his capabilities when it comes to in-water surf photography, which he really enjoys.
However, the funds made available by his TPD payout have provided Tom with the opportunity to investigate potential stem cell treatments with the hope of one-day regaining full use of his shoulder.
Tom’s metamorphoses from cabinet maker to creative professional photographer was only made possible because he had the right advice up front and the right support when the time came to make a claim ‒ a claim he did not even realise he was entitled to until his AFRM adviser told him.
So, if we have a moral to this story it is perhaps a simple one. Having insurance is good, having the right insurance can make all the difference in the world.
Of course, we understand that the circumstances of every client is different and that the recommendations made for each client must be those that are in each clients’ best interests. However, where it is appropriate, having retail TPD cover with “own” occupation terms makes it much easier for a client to make a successful claim versus having TPD cover with “any” occupation terms.
As Tom’s case highlights, the right insurance can provide the financial freedom to make your own decisions. The financial support Tom received allowed him to explore a creative, successful and most importantly, enjoyable venture that he would not have had the opportunity to otherwise.”
Having the right risk mitigation strategy in place really is about a couple of simple questions: Do we want to enjoy freedom of choice (financial freedom)? Or are we prepared to have our life dictated to us by circumstances largely outside our control (injury/illness)?
It is also crucially important to understand that if you or your client has group TPD cover through a superannuation fund, then this TPD will always be under the “any” occupation terms by law. This is the only TPD occupation definition permitted under superannuation legislation.
In closing, perhaps it is also relevant for our referral partners to note that while there is a perception out there that TPD is very difficult to claim on; cases such as Tom’s highlight that by ensuring your clients have “own” occupation TPD cover with a retail insurer, when appropriate, you can ensure the benefits of such cover are much easier for your client to access should the need ever arise.
For more details of the differences between “own” occupation and “any” occupation TPD cover, you can find it on the AFRM web site here.