Why TPD claims take two years to manifest

The average delay in superannuation funds and their insurers dealing with a total and permanent disability (TPD) claim is around two years, according to the Australian Institute of Actuaries.

The Institute has used its submission to the Productivity Commission (PC) inquiry into superannuation competitiveness and efficiency to argue for the implementation of improvements to the regime to overcome such problems.

The submission said that while it varies from scheme to scheme, the typical average delay in a TPD claim being notified to the insurer was around two years after the date of disablement with the delays for income protection claims being slightly shorter, but still significant.

“This has serious implications for return to work outcomes. It also leads to higher premiums than would otherwise be the case due to the uncertainty in estimating the ultimate claims cost,” the institute’s submission said.

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It said the reasons for the long delays were many and varied, but chief among them were:

• Low levels of awareness of cover;
• A perception that life insurance benefits will jeopardise workers’ compensation benefits; and
• Reluctance of some employers to assist in the reporting process for potential (or perceived) liability in relation to work related incidents.

The Actuaries Institute suggested these problems and particularly those relating to awareness and engagement could be overcome by utilising data from employers, workers compensation insurers, the Australian Taxation Office and Social Security to notify super fund trustees of potential claims.

It said this would allow super funds to proactively contact members about their ability to claim, as would messages embedded in the Workers Compensation claims process.

The submission also suggested the removal of regulatory barriers (including privacy law) for data sharing between Workers Compensation insurers and life insurers, where this might assist earlier notification of a potential claim to the life insurer.