Rethink TPD definitions says Furlan

The superannuation industry should take the opportunity of implementing MySuper to revisit the total and permanent disability regime and insurance definitions and acknowledge that "we've actually got this all wrong", according to former Superannuation Complaints Tribunal (SCT) chairperson, Jocelyn Furlan. 

Participating in a Super Review roundtable at the recent Conference of Major Superannuation Funds, Furlan said that on the question of disability she believed the superannuation insurance regime was broken. 

"And the reason I think that the system is broken is that we pay people to stay unwell.  We make them fight for a label of being totally and permanently disabled, and we add to their disability through the length of time the process takes, and the tribunal takes too long as well," she said. 

Furlan said that people had come to believe that total and permanent disablement meant never returning to work, and this represented a labelling problem. 

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"I think we know from the research that's been done, particularly coming out of Canada, that the chances of rehabilitating someone diminish rapidly more than 12 weeks after they've left work, and our definition requires them to remain sick for six months before they even lodge a claim," she said. 

"I think we ought to have a conversation about not paying lump sums, [but] I'm not entirely convinced about it being replaced by an income protection benefit because of the cost and the erosion of retirement income," Furlan said. "But if we paid a lump sum permanent incapacity benefit in a series of instalments, firstly your plaintiff law firms lose interest straight away, 'cause they're not getting anything out it, and secondly if there is a recovery then you can stop the instalment payments, and the person can go back to work again." 

"So I think that the My Super reforms requiring funds to rethink their disability definitions is a real opportunity to throw everything up in the air and say, 'We actually have got this all wrong'," she said.