In October last year ASIC called on life insurers to address what it termed a “problem with the design” of total and permanent disability

(TPD) insurance.

That problem was the activities of daily living (ADLs) definition. When claims were assessed under this narrow definition, 60% were declined.

The regulator suggested, but did not mandate, that insurers move away from using ADLs.

But this is yet to happen, says Health & Finance Integrated managing director William Johns.

He’s still seeing clients who are unable to work and desperate for help have claims rejected

under ADLs. The ADLs, Johns says, are particularly discriminatory to those trying to make a TPD claim because of mental illness or brain injury.

“Every time I have someone with mental illness and I’m claiming for them I know I’m going to go into battle for them – especially on TPD,” Johns says.

Johns says there has been instances in which insurers have said they have no option but to use ADLs (because, for example, a diagnosis only

emerged after someone lost their job) and are actually ignoring the alternative, which is instrumental activities of daily living (IADLs).

While ADLs only include the basic selfcare tasks of feeding, continence, transferring, dressing, toileting and bathing, the IADLs include using the telephone, shopping, preparing food, doing housekeeping, using transportation,

managing medication and handling finances.

Johns points out that Centrelink assessments broadly use IADLs, saying it’s ridiculous that a product you pay for can have a higher threshold

of access than the welfare system. “The taxpayer is pledging they are going to pay you a lifetime annuity for the rest of your life. That can amount to millions of dollars.

They have to use an extremely high threshold and even they use IADLs,” he says.

For example, he says that suicidal ideation is something that is taken extremely seriously in the psychiatric profession but it’s something that’s very difficult to make a successful TPD claim for.

A spokesperson for BT said its life insurance business continues to consult with industry and regulators regarding the use of ADLs. Hannover Re said it is working towards the removal of

the ADL definition from policies. A spokesperson for TAL said it is working with super funds to develop alternatives to ADLs. “In 2018 TAL worked with Cbus to develop its

‘Everyday Working Activities’ definition which has an 86% claims acceptance rate. This definition was recently updated to address members with mental illness,” the spokesperson said.

However, Johns says if insurers are serious about protecting people with mental illness they all need to completely scrap the ADLs and at least use the expanded IADLs.

Jewish House chief executive Rabbi Mendel Kastel has also run into the limitations of ADLs in his work. Jewish House assists those in crisis, offering a “hand-up, not a handout”.

“In many cases these people are homeless or at risk of homelessness. They might have serious mental health challenges. Being able to access some money to get them back on their feet is really important,” Kastel says.

Kastel has engaged Johns to help people get access to their insurance, and through that he too has seen that the ADLs are far too simple.

Clinical neuropsychologist Jane Lonie sees the flip side of ADLs, often assessing patients for TPD claims annd not always with all the information

about what it takes for claims to be paid. She says the letter of instruction provided to physicians varies depending on the referrer (whether it’s an adviser, lawyer or insurer). The specific industry designated criteria that the claim

will be assessed against is not always specified within the letter of engagement or instruction. “When you’re talking about somebody with an acquired brain injury or dementia, unless they are right at the most severe end of the spectrum

those basic ADLs will be intact,” Lonie says. When asked whether this group could hold down a job, Lonie says “absolutely not”. “It’s totally inappropriate to be measuring occupational function, the ability to hold down a job, on the basis of rudimentary skills like toileting.”

For Johns, it’s time for insurers to align their processes with society’s view of mental health. “The people who are being denied under ADLs not so long ago might have been institutionalised,”Johns says.

“Before they shut the institutions, I would have been arguing with an insurer that my client who has been institutionalised deserves a TPD payout and the insurer would have told me they

meet the ADLs.” fs

Published by Financial Standard vol 18n12 22 June Page 1