21 Jun Are you eligible?
We’re sure you’ve seen stories in the media lately about insurance claims getting denied and people being left out in the cold? More often than not this is because they had their insurance through their superannuation funds. You might think you’re covered but once you claim that’s where the real questions begin, especially around the area of eligibility. Richard Anderson of AE Consulting, who specialises in helping clients know where they stand on their group insurance policies, is here to shed some light on the matter.
What is group insurance?
Group insurance is a single contract that covers an entire group of people. Group insurance is the default cover in superannuation funds and can also be given to an employee as part of a benefit package. It’s attractive because it can often be cheaper than a policy you would take out for yourself.
In most circumstances entry into a group plan is simple, with short forms and often Automatic Acceptance. This means that in most cases the members are covered automatically without having to provide any health details. However, this is where issues can occur as opposed to individual underwritten insurance.
So, what is Eligibility?
The word eligible is crucial in group over and means “having the right to do or obtain something”. Typically, we see group insurance contracts with the following wording:
- Only an eligible person can become an insured member under the policy
- Satisfies the eligibility rules
- Where all of the following eligibility conditions are met
- Eligible persons shall become insured members if….
- First meets the eligibility criteria
- Ceases to meet the eligibility criteria
Eligibility conditions in more detail
Group insurance contracts often have a level of automatic acceptance, and the member “having the right to or obtain cover” automatically is often subject to the person being eligible under the following conditions:
1. Being a member of a complying superannuation fund, an employee or contractor of an employer, or a partner of a partnership.
Concern can be around part-time and casual work. Many insurers will allow casuals and part-time employees to have cover but this should be investigated and noted by the insured person.
2. Is aged less than the maximum benefit entry age
Care should be taken as to what the entry and expiry ages are for certain benefits. Today as employees are staying within the workforce a lot longer you need to be aware of what the entry and exit ages of your cover is.
3. Is an Australian resident or holder of an appropriate visa
Most group insurance contracts in Australia carry this condition, however most insurers also include New Zealand citizens who are residing and working in Australia on a permanent basis.
4. Residing in Australia
Whilst many insurers include the condition that insured members must be residing in Australia they will allow cover to continue (generally up to 5 years) for employees seconded overseas for work purposes. This in itself comes with certain conditions such as being advised regularly (generally at each renewal) with member information including location of the employees. Specific care should be exercised here as the treatment of overseas cover, the term of cover and the restrictions differ widely by insurer. Insurers do carry the right to offer further restrictions of cover on employees working overseas, but some insurers will not accept a claim if the event leading to the claim occurred in a country listed on the Department of Foreign Affairs and Trade website (www.dfat.gov.au) as subject to a ‘do not travel’ warning at the time they entered the country.
The reason insurers are cautious of overseas work the terrorist risk associated with some countries but also they have immense difficulty in assessing claims in foreign jurisdictions and making payment for international medical services. Many insurers will have the provision built into their contracts to insist that if an insured person becomes disabled or terminally ill, they reserve the right to ask the them to return to Australia (often at their own expense) for assessment of their Total and Permanent Disablement or Terminal Illness claim.
For any group plans with insured members residing/working overseas ensure that the insurer is advised and that they have agreed to this in writing.
5. Is working in (and continues to work in) an occupation that is not excluded by the insurer.
Many insurers have specific excluded occupations and either list these in their PDS, Policy Document or provide links on their website to view these. The extent of these excluded occupations vary widely by insurer and whilst cover may be provided to an employee initially and they subsequently change their occupation (not employer) then care should be taken to ensure that the insurer is notified to ensure continuance of cover, particularly if they are moving to a listed excluded occupation.
6. Satisfies the eligibility rules generally made by the employer, the superfund trustee, or the partnership/association
This is where most contentious issues/disputes arise. Eligibility to join can be very simple (where the same rule applies to all employees), or very complicated whereby eligibility rules may be category based (this may be occupation based, age based, length of service based or a combination of these). Often adding to category based complications is that different insurance provisions may apply to each category. These rules often stipulate when an employee is allowed to take cover under the employer fund, such as timing and/or after what period of probation. These rules will usually only be agreed to by the insurers if the rules do not allow an individual person to obtain insurance on a discretionary basis, or by their choice.
Notwithstanding this, there are also eligibility rules to qualify for automatic acceptance, and these normally include the following conditions:
- That the minimum number of insured members meets the minimums stipulated by the insurer (these differ widely by insurer),
- The Agreed Cover must be within the Automatic Acceptance Level agreed to by the insurer, and
- That the eligible person is “At Work” when their cover commences. (note the definition of At Work” varies widely by insurer). If they are not “At Work” then cover will generally only apply after they have returned to work (“At Work”) in a full-time capacity for 30 consecutive days or more). Some insurers will offer employees not “at Work” when first eligible, cover for new events only. Many insurers reserve the right to request the Policy Owner to provide “At Work” certification, and
- At least 75% of Eligible Persons remain covered at all times, and
- That the Insurer must be the sole insurer for Insured Persons of that group, and
- The person is not entitled to receive a payment of an insurance benefit for total and permanent disability or terminal illness, or be within the waiting period for such benefit payments. Some insurers will exclude cover if the person has been paid a total and permanent disability or terminal illness benefit previously.
At claim time the Insurers will seek confirmation of eligibility. Most group insurance disputes that Richard is asked to act as an “independent witness” to, or to provide an Independent assessment for, is around the question of eligibility. The discrepancies between eligibility as defined by the employer and as stated in the policy schedules occur far too frequently and are often only realised when a claim dispute arises and is too late to rectify. If you are providing advice to any of these employer groups it is vitally important that any inconsistencies, variances or divergences are rectified sooner rather than later.
A final comment
At the end of the day you get what you pay for. Cover through super and employer plans is cheap because it doesn’t necessarily guarantee cover and you may have to jump through a lot of hoops to claim, as we’ve written about before, and has been the subject of federal and media scrutiny recently. This is an area that requires you to be aware of your rights and options because the last thing you want is to be dealing with this situation at claim time. The vague nature of some clauses and lack of transparency is one of the reasons advisers often recommend cover outside of superannuation.
If you are concerned about group insurance coverage either through super or your employer Richard and Orion Financial Group can help you understand where you stand and how best to ensure you don’t have to go through the above in the event of a claim.
About the author
After 40 years’ experience in the financial services sector, including life insurance, reinsurance and superannuation sectors, and having held general management and senior management positions both locally and internationally, Richard Anderson has established a small specialist consulting business. He is primarily focussing on specific areas related to the Industry and his experience, and thus, AE Consulting Pty Ltd commenced operations in January 2015.
Over the years he has encompassed a broad range of expertise in risk insurance, reinsurance, superannuation, direct marketing, business relationship management, partnerships, product development, pricing, underwriting, claims and sales. In addition to his vast expertise in the Insurance Industry, he has also had experience with one of the world’s leading and recognised Regulatory bodies. At the Australian Prudential Regulation Authority (APRA), he was a Senior Manager a held responsibility for the front-line supervision of 14 international institutions in banking, wealth management (life insurance), superannuation, reinsurance and general insurance.
AE Consulting Pty Ltd are available to assist with group insurance specific issues on a fee for service basis and his rates are reasonable and competitive. He can be contacted on:
- +61 412 252 368 (Australia)