Is Your Super’s TPD policy a Time Bomb for Mental Health Claims?

The rise of Mental Health TPD claims – Why you should check your super policy.

Going back just 10-15 years ago the leading cause of Total & Permanent Disability (TPD) claims were for musculoskeletal conditions, amounting to about a third of TPD claims. Bad backs and joints were common and were about twice as likely to the cause of a TPD claim when compared to any other reason for a claim.

Today things have changed. Mental health is now the number one cause of TPD claims in Australia, accounting for almost one in three (31%) of all TPD claims paid.

There has been a 732% increase in TPD claims for mental health among Australians in their 30s over the last decade. Almost 80% of the overall growth in TPD claims in that period is due to mental health conditions.

From the increase in mental health awareness, pandemics, cost of living pressures and lawyers holding insurers to account, the rise of these claims puts the sustainability of TPD in the spotlight.

Recently I came across a PDS for an industry super fund which now references a set of definitions specifically for a TPD mental health. To me this was something new, as I had not come across this before.

The definition starts out normal, “since becoming ill or injured, have been under the regular care and attention of a Specialist Medical Practitioner for that Illness or Injury.”

Then it moves on to this part, “have exhausted all reasonable treatment options (medical or otherwise) and is not expected to attain any further improvement or recovery from the Illness or Injury.” Red flags ahoy!

What are all treatment options, medical or otherwise? What is otherwise? Maybe they mean waterboarding…. either way it’s a touch ambiguous.

For those that want to know, waterboarding is a wet form shock therapy used for mental health disorders back in the 1800’s – hospital personnel held patients underwater until they lost consciousness, after which they were considered cured of their madness, provided they could be revived of course.

Next it moves to this, “due to the Illness or Injury, you will be unable to ever again engage in any occupation for which you are reasonably suited, having regard to your education, training or experience up to the time (The Insurer) forms their opinion”

Another red flag. The insurers opinion? Not your doctor or specialists….

The use of absolute words like “unable” and “ever” in this part also sets an incredibly high bar that many medical specialists would be hesitant to sign off on. Normally a good policy would state that you are unlikely to be able to engage in your own occupation ever again. The issue with this is a medical specialist must be certain you can’t ever return to work, so would they put their name on the line to sign off TPD? Maybe, maybe not, maybe a lot less.

And now we move into the mental health part of the definition,

“the Illness is a mental health condition that:

a) has been diagnosed by a Specialist Medical Practitioner using criteria outlined in the DSM;

b) your treating Specialist Medical Practitioner considers you have reached maximum medical improvement; and

c) you have been assessed by a suitably qualified Specialist Medical Practitioner, approved by (Name of insurer), under the Psychiatric Impairment Rating Scale as having an impairment of 19% or above”

A person with a 19% or higher PIRS impairment is not just having a “bad patch.” They are living in a persistent state of compromised functioning with their ability to cope with the complex, sustained demands of work, family, and daily life is severely diminished. They are likely under the regular care of a psychiatrist and may have tried multiple treatments with limited success.

My questions about this part of the definition:

How does one quantify they have reached maximum medical improvement?

Why does the insurer only use their own approved Specialist Medical Practitioner? Conflict of interest?

You would be disappointed if you met every criteria and fell 1% of meeting the 19% PIRS impairment!

It’s worth noting that this insurer will also consider whether any treatment, rehabilitation, retraining, or re‑skilling, could be reasonably undertaken in the future, when assessing your TPD claim. So, if they think you can go back to work, one way or another then they will deny your claim.

Overall, this TPD definition has more red flags than a Chinese military parade!

However, I can understand why the insurer now has this definition. It’s making sure TPD is a sustainable product, so claims don’t exceed premiums collected. It’s to make sure there are actual hurdles for people to meet when lodging a TPD claim. I think we will see these types of TPD definitions start to look more similar in future.

Would I recommend a policy with this TPD definition at the moment? NO

The first policy has specific, high-barrier rules for mental health that are designed to be very difficult to meet. But there are much better policies out there.

Your chances of a successful claim are dramatically higher under a good TPD policy utilising an Own Occupation definition. It looks something like this, “you are disabled to such an extent that you’re unlikely to be able to engage in your own occupation ever again.” Obviously a huge distinction is the TPD claim being based on your own job, and not your inability to do any occupation. There is no clause for re-training or re-skilling, like the first policy described has. Note the word “unlikely” in this defintion too – it’s not an absolute.

When it comes to mental health this industry super TPD policy is chalk, and a good retail insurance policy based on your own occupation is the cheese! It makes a world of difference when it comes to claims.

Want to sort out your TPD cover? Engage a professional financial adviser or contact us now to discuss.