A government committee investigating the life insurance industry has been slammed for failing to address the substantial delays in income protection payouts that are hurting policy holders.
Senior superannuation and disability insurance lawyer at Slater and Gordon, Sarah Snowden, said that some policy holders are waiting up to 24 months to receive legitimate payouts – clearly overlooking the point of income protection insurance of covering lost earnings during a period of illness or injury.
“One year or more to determine an income protection claim is too long. The fairness and efficiency of claims handling processes in this area leaves [sic] a lot to be desired,” she said.
“An income protection policy is meant to do just that: that is, to protect a person’s income when they are unable to work due to an injury or illness, when they are at their most vulnerable.
“But then, to encounter the financial distress and hardship resulting from unnecessary delay and process of their claim, literally adds insult to injury.”
Ms Snowden said that a report by the parliamentary joint committee does not go far enough in addressing these concerns.
And, she said, with people in such situations forced to turn to Centrelink benefits while awaiting their payout, the government should be more concerned with forcing the industry to meet best practice standards.
“By the time the decision on their income protection payments is made, often the total debt incurred by the injured person is far in excess of the money they will actually receive if their payments had been made promptly,” Ms Snowden said.
“Many people with income protection claims are not going to remain off work forever but they deserve to be supported by the policies they’ve taken out in this instance.”
She added: “It’s unfortunate that people who take out an income protection policy have to go through this rigmarole for support they are entitled to. This is an issue that will only get worse if it is not addressed sooner rather than later.”
The committee’s report made a number of broad recommendations about oversight of the industry and aligning consumer protections to other financial services, although no specific mention of payment determinations and timeframes was included in those recommendations.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.