‘Incorrect’ outcome main reason for reversed life claims
April 26, 2022
About 73% of reversed disability income insurance (DII) claims were changed after the initial decision was determined to be incorrect, according to new data from the Australian Prudential Regulation Authority (APRA).
And some 68% of initial death claims decisions that were later changed were reversed for the same reason, 67% for total and permanent disability (TPD), 47% for trauma, 55% for consumer credit insurance and 40% for funeral.
Accident cover is the only exception out of the seven products covered by the APRA data where the majority of initial claims outcomes that were reversed (38%) were changed because additional information was received.
APRA provided the figures in its latest life insurance claims and disputes outcomes data for the rolling 12-month period to December 31, based on inputs from 20 insurers writing direct business.
DII has a claims paid ratio of 55% for products sold through the individual advised distribution channel, 186% for individual non-advised, 113% for group super and 128% for group ordinary, the APRA data shows.
Individual-advised TPD products has a claims paid ratio of 50%, individual non-advised 71%, group super 93% and group ordinary 44%.
APRA says individual advised business generally shows higher claims admittance rates than individual non-advised for the same cover type.
“This could be due to the policyholder having clearer expectations up front of what is covered by the product, or (related to the previous point) the adviser discouraging the policyholder from lodging a claim that is not covered by the policy,” APRA says.
But accident is an exception, where the claims admittance rate is similar between the two channels – individual advised and individual non-advised – where the product is sold.
APRA says a total of 6160 disputes were resolved during the reporting period, with TPD and DII making up the vast majority of the dispute cases at 31% and 55% respectively.
Click here for more from the APRA data.