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Year-long wait and $0 payouts: Insurance industry failures exposed

Eliza Bavin
·2-min read
<em>(Source: Getty)</em>
(Source: Getty)

Australian insurers have been put in the firing line by the prudential regulator after it was revealed some of the country’s largest insurers are knocking back large volumes of claims.

On average, 10 per cent of death claims are rejected industry-wide if Aussies go directly to the insurer.

However, for those who get death cover through their super fund or financial adviser the rejection rate goes down significantly.

Why?

APRA found that in most cases (52 per cent) insurers rejected claims due to the contractual definition of ‘death’ not being met.

22 per cent of rejected death claims were due to exclusion causes, 3 per cent for unintentional non-disclosure or misrepresentation, 1 per cent for fraudulent claims and 22 per cent for “other reasons”.

(Source: APRA)
(Source: APRA)

Who is rejecting the claims?

The worst offender is St Andrews which rejects around 17 per cent of death claims made, TAL rejects around 15 per cent and Swiss RE rejects 13.5 per cent of death claims made.

And it’s not just death claims which are coming under fire.

Total and permanent disability (TPD) cover has also seen many insurers missing the mark

For example, TAL rejects 32 per cent of total and permanent disability insurance claims, taking on average 7.6 months to make a payment.

AIA was close behind, rejecting 29.2 per cent of TPD claims taking around 11 months for customers to claim.

But it’s not all bad news - there are some areas which have seen a higher volume of accepted claims by Aussie insurers.

Funeral insurance had the most accepted claims, with around 99.3 per cent being accepted industry-wide. It also had the shortest wait time for claims to be approved.

AIA, ClearView, OnePath, TAL and Westpac accepted 100 per cent of funeral claims made from 12 January 2020 to 31 December 2020.

APRA’s MoneySmart life insurance comparison tool recommends consumers check a number of factors when looking at life insurance to ensure you don’t get caught out by rejected claims:

  • What is and isn’t covered, including definitions for medical conditions and pre-existing conditions

  • Additional benefits or features

  • Waiting periods before you can claim

  • Premiums, both now and in the future

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