Insurers using ‘totally inappropriate’ test to discriminate against people with mental health conditions
Super Consumers Australia and the Public Interest Advocacy Centre (PIAC) are calling on super funds and insurers to stop discriminating against people who have mental health conditions.
The organisations have condemned the use of ‘activities of daily living’ (ADL) tests to assess disability insurance claims.
To successfully claim on a policy that uses an ADL test, a person must show they can’t do two basic physical activities such as speaking, walking, eating, dressing or using the bathroom.1
“The practical impact is people with a mental health condition can’t claim on this insurance when they need it most. It’s clear these terms disadvantage people with mental health claims and are designed to protect insurer profits”, says Super Consumers Australia director Xavier O’Halloran.
PIAC has long held concerns about insurance discrimination against people with mental health conditions.
“Excluding people from protection because they have a mental health condition is unacceptable,” says Senior Solicitor Ellen Tilbury.
“We’ve seen insurers do it before by imposing overly broad mental health exclusions. The use of ADLs is another attempt to deny adequate cover to people with a mental health condition,” Ms Tilbury says.
1 Example of an ADL: REST Super Insurance Guide
https://www.rest.com.au/NEW-Document-library/Guides/Member/RES0254_REST_Super-Insurance-Guid e-FA_WEBSAFE.pdf p.27
Clinical neuropsychologist Dr Jane Lonie says ADLs are “totally inappropriate” for measuring the occupational function of people with mental health conditions or injuries causing cognitive impairment.
“I am very concerned about the practice of using ADL tests to measure whether people with these conditions can hold down a job,” says Dr Lonie.
Research released by Super Consumers in early July found that 30 of the 32 insurance policies (94%) from Australia’s biggest superannuation funds contain restrictive definitions of total and permanent disability (TPD) that apply the ‘activities of daily living’ ADL (or similar) test on the basis of work status.
Corporate regulator ASIC has found that claims assessed using an ADL test are 5 times more likely to be rejected. It also found that 77% of mental health claims were rejected when an ADL test applied, compared with 15% when the standard test applied.2
The Financial Services Council has agreed to temporarily waive discriminatory terms until 1 January 2021 due to the global pandemic. Super Consumers maintain that ADLs should be ruled out for good.
“Insurers and funds have a duty to act in members’ best interests and to ensure that their services are fit for purpose. Making people pay full price for insurance they can’t claim on doesn’t meet that purpose, these terms should be removed altogether,” says Mr O’Halloran.
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Background
Total and Permanent Disability (TPD) insurance provides financial support to those who can never work again due to disability. While policies vary, most consider a person eligible for a payout if they become disabled and are unlikely to return to work in any occupation for which they are suitably qualified.
However under many default policies, people who don’t meet certain criteria must pass an Activities of Daily Living (ADL) or Activities of Daily Work (ADW) test.
These restrictive tests require a person to show they cannot perform basic physical tasks such as bathing and feeding, and are extremely difficult to pass. In 2019,
2 ASIC, REP 633 Holes in the safety net
https://download.asic.gov.au/media/5311117/rep633-published-17-october-2019.pdf p.9
corporate regulator ASIC found that people subjected to restrictive tests were 5 times more likely to have their claim rejected.3
Research by Super Consumers confirms that people who are unemployed or work less than a minimum number of weekly hours are most likely to be subjected to restrictive tests. With unemployment and underemployment increasing due to the global
COVID-19 pandemic, many more people are likely to fall into this category, limiting their ability to make a successful insurance claim.
- 94% of insurance policies from major super funds make it difficult for people to claim on their insurance if they are unemployed.
- 47% of insurance policies from major super funds make it difficult for people who work less than full-time hours to claim on their insurance.