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Insurers COVID-19 response slammed

An announcement from the Financial Services Council (FSC) that life insurers would keep their COVID-19 support measures in place until the end of the year doesn't go nearly far enough, a lawyer has said.

As part of the insurance response to COVID-19, those who lose their jobs or move from permanent positions to casual work during the crisis will not have their level of insurance changed. Originally, this moratorium was in place until September but it has now been extended until the end of 2020.

But, Maurice Blackburn insurance and financial services law principal Josh Mennen said the FSC's extension doesn't go far enough.

"It's only after JobKeeper ends that we will see the full impact of unemployment as a result of COVID-19," Mennen said.

He said it doesn't make sense for insurers to have this initiative in place, with the understanding that employment will be impacted by COVID-19, but not extend it beyond the life of the JobKeeper program.

"JobKeeper is softening the claims experience for insurers because more people are still employed as a result of it," he said.

"We're critical of the FSC's extension because we think it should be extended until at least the end of JobKeeper, but really it should be extended beyond that."

Consumer advocates, he said, have identified that a lot of people are likely be forced into less secure employment because of COVID-19 - a consequence of this could be that they are "shunted" into a form of limited insurance coverage.

These consumers that find themselves with limited cover in group insurance policies and being assessed against ADLs are likely to be paying the same premiums as their full time, permanently employed peers who are fully covered.

"The type of disability insurance people get depends on their employment status - if they're a full time, permanent employee they're likely to be fully covered but casuals are likely to receive limited cover. That limited cover involves assessing claims against the limited Activities of Daily Living (ADL) definition," Mennen said.

Mennen described insurance policies that use ADL as "abhorrent, substandard products".

"It only pays out if a claimant is unable to perform the activities of daily living - which are basic things like feeding, washing and clothing themselves," he said.

"People are shunted into this definition because of their employment status."

Mennen argued that from an underwriting point of view, changing the level of cover depending on a person's security of employment doesn't have a clear purpose. He said ADL assessments are "exploitative of the most vulnerable workers" and make mental health claims exceptionally difficult.

"The ADL definition and policies that offer limited cover while full premiums are being charged are unacceptable," Mennen said.

He acknowledged that the life insurance industry broadly is moving away from the ADL definition. But, he pointed out that introducing new policies with broader cover doesn't necessarily go far enough, as that doesn't change things for those insured under the old policies.

FSC chief executive Sally Loane responded by saying: "The COVID-19 situation is fluid and therefore it is important that the industry has the ability to adapt to meet future events. This is why we have already extended the initiatives, to 1 January 2021."

Read our full COVID-19 news coverage and analysis here.

Read more: ADLFSCJobKeeperFinancial Services CouncilJosh MennenMaurice Blackburn
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