TAL wants a time limit put on disability claims for “living benefit” policies.

CEO Jim Minto says open-ended policy wording leads to longer periods between incidents and lodgement, which delays settlement.

“As well as being difficult to determine due to insufficient evidence, late-notified claims could also have potentially harmful implications for life insurers’ costing models.

“That’s because these unaccounted-for, long-dated claims make it harder for insurers to adequately calculate their ‘incurred but not received’ reserves and capital needs.”

Mr Minto says insurers face disability claims from people who have cancelled their policies or are back at work.

“This means life insurers are forced to assess total and permanent disability claims for when someone was once covered and [claimants] may even be working at the time of the late claim.

“A big problem with the current open-ended disability claims is that the greater the distance between a claim [event] and the time it is made, the harder it becomes for both insurer and claimant to successfully process the claim.”

Under Section 54 of the Insurance Contracts Act insurers must deal with claims despite the length of notification time.

Mr Minto says consumers can end up paying more for cover, because insurers must maintain reserves to cover future claims.