Women more affected when waiting for TPD insurance claims

New research for MLC Life Insurance has found women have less savings than men in the event of a disability that stops them from working, highlighting the flaws in total and permanent disability (TPD) insurance product design.

The research, conducted by Freshwater Strategy for MLC Life, found 35 per cent of Australian female workers have one month of savings if they are forced to stop working after a disability, compared to only 22 per cent of men. The standard design of disability insurance as encompassing TPD insurance only also makes more women susceptible to loss of income, waiting an average of two-and-a-half years to make a claim.

“The current approach to disability insurance in superannuation is centred on a binary assessment of total and permanent disability,” Kent Griffin, Chief Executive Officer for MLC Life Insurance, said.

“While it works for some, the evolving needs of members and changing nature of disability requires a debate about the most appropriate default disability insurance system that meets these needs.

“TPD is a crucial safety net for those experiencing severe and long-lasting impairments, however its binary framework falls short in addressing the complex needs of Australians who experience temporary disability through injury or illness which is increasingly common in today’s environment.”

The research also indicated the majority Australians believe a review of the default TPD insurance system is necessary, with 50 per cent believing the current system to be unacceptable and 57 per cent preferring a stream of regular income rather than a lump sum payment.

Mark Puli, Chief Group Insurance Officer for MLC Life Insurance, said there is no support for individuals with a temporary incapacity under the TPD framework, with many claimants eventually returning to work. According to the research. 55 per cent of people would still make a disability claim even if they expected to return to work or fully recover.

“Australians revealed a clear preference for income stream alternatives to lump sum payments in the event of disability,” he said. “This preference aligns with the reality that many Australians simply lack sufficient savings to sustain themselves for extended periods of unemployment due to temporary disability.

“As one of Australia’s oldest life insurers, we’re determined to work with government, trustees and consumers to develop a more equitable and sustainable framework for supporting members with a disability, especially those with mental health-related disabilities.

“This framework should consider income stream alternatives within superannuation, address the gaps created by a total disability framework and instead focus on health, wellbeing and recovery, and enable a better and supportive interaction between private and public support schemes such as the NDIS.”

“People shouldn’t have to choose between their health and financial support, inadvertently increasing their risk of developing a level of permanent disability that necessitates support under the National Disability Insurance Scheme (NDIS). This heightened risk places a strain on the sustainability of the entire health and wellness ecosystem and worker safety net,” Griffin said.