Lawyers are becoming increasingly active in the life insurance market, offering to help the sick or injured make claims against policies in cases where those policies are bought through superannuation funds.
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It is potentially big business. The majority of Australians take out life insurance through their super fund, as this is, generally speaking, the cheapest way of obtaining cover and does not involve extensive health checks.
Life insurance, of course, includes much more than cover against death. Most so-called default policies obtained through super funds will also protect consumers against financial losses should they become totally and permanently disabled, or are unable to work for an extended period of time because of injury or illness.
Super funds have grown increasingly concerned that lawyers are becoming involved in claims from an early stage, even before a claim has been knocked back.
The Association of Superannuation Funds of Australia has become so concerned that it recently wrote to the Law Society of New South Wales, questioning the legal sector's involvement in the claims process. Super scheme bosses argue that the involvement of solicitors pushes up the cost of administering claims and can leave members out of pocket because legal firms demand a portion of any payout as their fee.
Lawyers have hit back, arguing that some super funds and insurers take far too long to make decisions on claims, on top of which they have been known to make incorrect decisions.
But super funds insist that for the majority of cases there is no need for a policyholder to hire a lawyer to process a claim, particularly as lawyers can receive up to 40 per cent of any payout as their fee.
Furthermore, the funds say, the claims process is far from arduous and the vast majority of claims are honoured in full. AustralianSuper, the country's biggest industry retirement scheme, says that between 85 per cent and 90 per cent of claims are paid in full "regardless of whether a lawyer has been involved".
Says Richard Weatherhead, head of insurance product at AustralianSuper: "As soon as you engage a lawyer, straight away it is a cost."
Natalie Eckersall, general manager of claims at National Australia Bank-owned MLC, says it is up to the customer to decide whether it is appropriate to engage a lawyer. In some cases, policyholders might benefit from having assistance from a third party, particularly as insurance claims are invariably made at stressful times.
On the other hand, Eckersall says: "You would expect to have to provide part of the benefit of a lawyer at a time when you will almost certainly need all the money you can get."
Eckersall says policyholders should not be daunted by the claims process. "We're here to make the process as simple as possible. We can support you through it," she says.
So how do you go about making a claim if you are unable to work because of ill health or injury?
Weatherhead recommends super fund members ring their fund if they have been off work due to an injury, or have been diagnosed with an illness that will prevent them from working.
In many cases the fund, or its administrator, can help the policyholder fill out the necessary forms on the phone. The fund will request supporting medical documents from doctors and specialists, but Eckersall says fund representatives can usually do this on behalf of the member or policyholder.
Assuming that the cover is in place, the fund member will be assessed to see if they are eligible to claim against their total disability and/or income protection policies.
Income protection policies will typically pay up to 75 per cent of a policyholder's salary for a maximum period, say two years or until age 65. Total disability insurance is generally paid as a lump sum to help cover treatment and pay off debt. In order to claim against total disability policies, the policyholder generally has to be off work for at least three to six months, and never be able to work again.
These days, super funds and insurance companies are becoming increasingly savvy at helping the sick or the injured get back to work. AustralianSuper not only offers a range of medical and rehabilitation services, but it also has vocational service teams who will help with job searches and applications and even interview techniques.
If a claim is dismissed by the insurer, a policyholder has a couple of avenues to pursue. First, there will be an internal dispute resolution service, and if this produces an unsatisfactory outcome, members can appeal to the Superannuation Complaints Tribunal. "A very small number of claims go through internal or external dispute processes. It is minimal," says Weatherhead.
However, if that process fails, he says, there is always the option of legal action.
Weatherhead says AustralianSuper has about 1.3 million members with life insurance. In a typical year, it pays out some 2800 income protection claims, 1400 total disability claims and about 1500 death claims.
