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Unpacking the intricacies of assessing occupational income replacement claims
BUSINESS MAVERICK
Adverts for occupational income protection cover typically promise protection of income if you are unable to work due to illness, injury or disability. Although the intention and purpose of this type of cover is to ensure that income is replaced during difficult times as a result of ill-health and incapacity, the true context in which an income replacement claim is assessed and managed is not necessarily made readily available to you when you are signing up for the policy.
Unfortunately, it is also seldom made clear at the time of a claim.
The reality of the claims assessment process related to this type of benefit often renders policyholders confused, frustrated, angry, and at a particular juncture, also without an ongoing income – which they were led to believe they were entitled to.
Three of the biggest areas of confusion arise through:
- the policyholder being under the mistaken impression that the monthly payment is a type of early pension, which will seamlessly continue in the years ahead.
- the patient’s doctor or specialist providing feedback that the patient is disabled, without any knowledge of the policy terms and conditions, or the claims process.
- the lack of explanation that the definition of being disabled in terms of being unable to work typically relates to very specific occupational policy wording that usually changes after the first 12 or 24 months of receiving an income benefit.
When it comes to the mistaken impression that the monthly payment is a type of early pension – pension fund providers should explain to their members that the application for benefits under the risk cover in place is an entirely separate assessment to that of ill-health retirement as decided by a board of trustees. It revolves around the criteria set out in an insurance contract, as assessed by a life office, whereas the ill-health retirement falls to the board to determine. Importantly, it should be noted that the determination of an early ill-health retirement from a pension fund and the successful admission of a claim lodged under a risk benefit do not always align.
Returning to income benefits – an example of policy wording could read as follows:
“The Income Continuation Benefit pays a regular income if the member experiences a loss of income upon being unable to follow their defined work functions due to injury or illness. For an initial period of 12 months, the member will be assessed in terms of the effect that the disability has on his or her functionality. The assessment will take into account the reasonable continuity by which the member is no longer able to perform the material and substantial duties of his or her regular job ….
Thereafter [the life office] will assess the member’s disability based on his or her inability to perform with reasonable continuity the material and substantial duties of his or her own or any occupation …. for which the member could reasonably be expected to be qualified for or suited to, taking into account the degree of disability as well as the knowledge, training, education, ability, experience and age of the member.”
There are numerous variations to the above-mentioned type of definition, some of which include the ability of the life assured ‘to become suited’ to another occupation and others that make no reference to age.
The extracts of the definition cited above are merely an example of some of the complexities of the contract wording against which evidence is required to be weighed and balanced at claims stage.
What is often misunderstood is that at some stage in the lifetime of the claim the policyholder will be assessed on a different occupational basis to that which was used when the claim commenced. This is typically referred to in industry terms as the change over from the initial ‘own occupation’ period to that of the ‘suited or any other occupation’ period.
To make matters more complicated the reference to ‘regular job’ is quite different to that of an occupation. A job is what you do in a very specific area of work. An occupation is an entire category of work that includes typical tasks, education, training, wages, work environments and other more broadly defined factors.
The different parameters of assessment in the initial period of disability and those that are applied thereafter in the definition cited are vast. The first 12 months focuses on the material and substantial duties of your regular job, whereas the second part of the definition focuses on the material and substantial duties of any occupation, taking various factors into account.
It stands to reason that the claims assessment process is one which requires much expertise. It includes the collation and analysis of substantial medical and occupational information, along with unique individual functional capacity related evidence.
Claimants can find themselves quite at sea when it comes to what is required in submitting pertinent information, as well as understanding how the information is assessed at different life stages of the claim. This is an unfortunate reality I have repeatedly seen in 35 years of working with the assessment of disability and related contractual terms.
Further, it ought to be noted that simply because a life office decides that an individual is suited to another position of work, does not necessarily make it so. There are numerous parameters within which such a decision needs to be made in the real context of occupational capability and suitability. This is an expert field on its own. Needless to say, it is also an area of considerable dispute.
Life offices owe it to claimants in receipt of occupational benefits to provide clear explanations of:
- how the claims process will unfold;
- what the exact definitions of disability are;
- how the ongoing validity of a claim is to be determined and
- what is required in order to ensure a smooth ongoing assessment process.
Policyholders should also be made aware that there is usually room for an application for partial benefits when it comes to supporting their engagement in some form of work in the future rather than none. This is typically referred to as the “loss of earnings” benefit, which is mostly conspicuous by its absence in explanation when benefits commence.
Occupational disability income benefit claims are complex. The responsibility of explaining the meaning, interpretation and application of the contractual terms and the nuances of the management of income benefits lies with those who assess this type of claim, from the outset.
Policyholders, particularly those on group benefit insurance and who had no choice in the cover selected, should not have to battle with more than they are typically already facing in their hour of insurance need, due to the lack of clarity and explanation given about how the claims process works.
Elise Burns-Hoffman
First published by Business Maverick on 17th December 2024.
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