Delayed Total & Permanent Disability Payments: When Insurers May Owe You More

For most reaching the end of a Total & Permeant Disability (TPD) Claim marks the finalisation of a long and stressful journey — finally, a sense of relief and financial certainty after months (or years) of uncertainty. But what many don’t realise is that the payment they receive is not always the full amount they may be entitled to.

Insurer’s will rarely offer you this.

For some, the claims process and assessment period can be significantly drawn out, and payment of TPD benefits can be unreasonably delayed. In these circumstances, you may be entitled to a further payment on the interest on top of your TPD benefit.

The rule almost no insurer mentions

Under s 57 of the Insurance Contracts Act 1984, where the insurer is liable to pay a benefit under the policy, they may also be liable to pay interest in addition. Interest becomes payable from that date that the insurer begins to unreasonably withhold payment of the benefit and runs until the date the benefit is paid.

When is it unreasonably withheld?

The payment begins to be unreasonably withheld once – objectively looking at the claim materials provided the insurer had enough information to pay the claim and should have.

Under s 57, interest is calculated at:

• The rate prescribed by regulation; or
• If no rate is prescribed, a rate equivalent to the 10-year Treasury bond yield + 3%, as applied by courts.

In practice, this can result in a meaningful additional payment, particularly where delays span many months or years.

Insurer says “But we were still investigating the claim”

Usually the insurer will argue ‘We couldn’t pay the claim, because we needed further information’. In a lot of these cases, the insurer can be right, if they are waiting on treating doctor’s reports, medical records or completed forms. The insurer has a duty to make reasonable enquires and cannot be punished for doing so.

But there are two points that work against the insurer:

The insurer’s belief may not save them (if its unreasonable)

Some policies say disablement must be proved “to the satisfaction of the insurer” or “in the insurer’s opinion”. But that does not give the insurer a free pass to delay payment.

The insurer’s view still needs to be honest, reasonable and based on the evidence. If the claim material objectively shows the policy terms are met, the insurer cannot avoid interest simply by saying it was not yet satisfied, or that it wanted more information.

In short: a subjective belief is not enough. There must be reasonable grounds, supported by objective material, Whether a delay is unreasonable will always depend on the facts of each claim.

But where the delay goes beyond what the evidence justifies, it may trigger interest under s 57.for continuing to withhold payment. Otherwise, the delay may trigger interest under s 57.

Unnecessary information requests are a choice – not a requirement

Insurers can sometimes engage in delay the payment of claims by making onerous and unnecessary information requests – for instance, the insurer may attempt to delay finalising a claim by requesting a transferrable skills assessment at the very end of a long claim process. This is especially unnecessary if the insurer has medical evidence confirming the claimant does not have any medical capacity for any alternate roles.

Unnecessary delays appear time to time in TPD Claims, and if identified correctly, could mean you’re entitled to a significant payment.

What to do if you suspect a delay

If your claim took a long time and your insurer has never raised the possibility of an interest payment. It is worth a closer look – particularly if:

• There was a significant period were the insurer seemed to have all key documents but kept asking for more.
• The insurer initially declined or threatened to decline but paid later on.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.