Hostplus, AIA lose $1.4m TPD dispute

AFCA has overturned a decision by AIA Australia and Hostplus over a refusal to pay a $1.466 million additional total and permanent disablement (TPD) benefit, despite recognising the member failed to declare an underlying health issue when applying for cover.

The determination, made March 26, found AIA was still required to pay the additional TPD benefit despite the complainant not disclosing he had diabetes.

"The default amount for TPD was paid by the insurer with an amount for interest. Whilst the insurer paid interest on the default TPD benefit, the complainant says that the insurer delayed deciding and he should be paid further interest on the default TPD benefit and on the additional TPD cover benefit, which was declined," AFCA said.

AFCA acknowledged that whilst the complainant should have answered 'yes' to the insurer's question about whether he suffered from medical conditions requiring treatment, the panel determined that it was a "misrepresentation" as opposed to being "recklessly indifferent to the truth".

According to medical records, the complainant was diagnosed with diabetes in 2018 and made the application for insurance in 2020. He then stopped work in 2021 and lodged the TPD claim in 2022.

AFCA said doctors notes also provided an extensive list of the medications that the complainant was taking in relation to a range of medical conditions. However, it said the bulk of the conditions and treatments were for relatively short periods.

"The complainant says that he has always been concerned about the possibility of diabetes and did not consider the medicines he was taking as treatment, because his condition was well controlled. In the panel's view the complainant's diabetes was well controlled because he was under the ongoing care of a doctor and taking oral and injectable medications," AFCA said.

"In other words, he was receiving treatment for his diabetes at the time of his health declaration. In the panel's view a reasonable person in the circumstances would not have held the belief that his diabetes was not currently requiring treatment and would therefore have answered the health question in the affirmative.

"Accordingly, the panel is satisfied the complainant's negative response to the health question was a misrepresentation."

As a result, the AFCA panel determined AIA unreasonably delayed paying both the default TPD benefit and the additional TPD cover benefit and in accordance with section 57 of the ICA.