Total and permanent disability (TPD) cover in group life is in a transition phase as definitions tighten, but Rice Warner says more rehabilitation is being offered.

Some changes are driven by the regulator and consumers’ focus on claims.

In a paper on the segment, the actuary says insurers have been updating TPD definitions to align them with fund members’ best interests.

Changes include requirements for reasonable retraining and rehabilitation in definitions; replacing the word “unlikely” with the more definite “unable” or “incapable”; and defining more clearly the date at which the claimant’s condition will be assessed.

Insurers have put restrictions on the provision of cover for past TPD and terminal illness claimants as a result of increased claims. They are also looking more carefully at the “actively at work” status of members seeking to either initiate or increase their cover.

Rice Warner says insurers have only recently considered broader use of rehabilitation for TPD claims.

“With an upgrading of processes to encourage early notification of claims, its wider use is being tested by most insurers,” it says. “A study by SunSuper showed about 36% of successful TPD claimants were returning to work following recovery from their disability.”

The paper says that despite more than 80% of TPD claims being paid, lawyers are becoming more involved, even where there is no dispute.

“In these cases, the involvement of the lawyer often results in no different claim outcome than if there had been no lawyer, or a significant legal fee, which reduces the funds available to the claimant.

“It also results in a slowing down of the claims process due the extra party being involved, but a better understanding of the claims process by the claimant, if the lawyer does their job well.”

Super funds are improving their communication with members, pointing out genuine claims will be paid without the use of a lawyer, the paper says.

“Already we are seeing large funds establish significant partnerships with their insurers, recognising it is in the interests of both to build a sustainable insurance business. We expect a transitional period for the super industry before benefits are better aligned to member needs and insurance becomes more profitable.”