Life insurers are paying out the full amount of trauma cover for claimants even if they are only off work for a few days, says Munich Re Chief Medical Officer Bill Monday.

“If I have one word for trauma, it has to be sustainability,” he told the Actuaries Institute Financial Services Forum in Melbourne last week. “What I am seeing is a broad spectrum of strokes and cancers being paid the same amount.”

Dr Monday says Munich Re has no problems with payments for severe cases, but recounted the case of a stroke claimant who recovered in three days being paid $2 million.

“I see stage one thyroid cancer claims being paid $600,000, and this is making trauma claims unsustainable due to a misalignment in payments.”

Dr Monday says he has no problems with trauma definitions, but he does have a problem with payments being made regardless of their true seriousness.

There was also the issue of people being paid the same amount after being treated for an illness and then making another claim for a less severe event.

“People who get corrective treatment earlier are still getting the same income,” he said. “We have seen thyroid cancer up 20% in the past 20 years, but now the treatment is one or two days in hospital with excellent survival rates. But [claimants] still get the full payment.

“Screening is picking up more cases, so there is more chance of a cure.”

Dr Monday says the focus must be on sustainability when paying for less severe medical events, and not providing “windfalls” for claimants.

Munich Re Leader Client Quotes Kris Boundy made a similar point, telling the forum payments must be aligned with a client’s needs.

“If a payout puts the client in a better [financial] position than before the event, that is not the role of insurance,” she said. “The full benefit should only be in severe cases.

“That is an alignment issue we need to discuss.”