There has been much confusion and misinformation around pandemic exclusions in group insurance in superannuation lately.
A few weeks ago, the Financial Services Council put out a statement that there were no pandemic exclusions in life insurance. That was quickly retracted when it was pointed out that some group policies did include pandemic exclusions or limitations.
Some super funds then put out statements that they had arranged for exclusions to be deleted and other said that they would not rely on them or would look favourably on Covid-19-related claims.
Superannuation Consumers Australia accused super funds of rejecting claims because of pandemic exclusions and asserted that none of the exclusions or limitations were justified because they would leave super fund members without cover.
The public discussion has been at best confusing and at worst misleading.
Most group insurance policies negotiated by super funds on behalf of their membership have always and continue to provide cover for all health-related problems, including Covid-19
Unlike individually underwritten policies, group policies invariably do not exclude pre-existing conditions or particular injuries or sicknesses in providing default cover. In the AIDS crisis, some insurers did adopt two-year HIV/AIDS-related exclusion clauses but when challenged (including by yours truly), they quickly disappeared.
One or two funds do have general pre-existing condition exclusions (e.g. MLC Superannuation plans) and after the introduction of Choice of Fund in 2005, most funds have insurance with an “at work” test of capacity for cover to commence.
It is true that a few funds and group insurers have introduced a very limited form of HIV-AIDS exclusions for pandemics, namely, that if you become disabled or die within 30 days of cover commencing or increasing because of a pandemic -related condition, the policy will not respond (e.g. HESTA).
Insurers and funds have justified the limitations as an anti-selection measure necessary to hedge against people taking out cover when they know or suspect they have the virus.
Given the dire warnings about potential large loss of life from Covid-19, including those of working age, a very narrow exclusion clause aimed at limiting members taking out cover when they already have the virus may be justified.
Some funds have limited the exclusion to not apply to new members joining via employers’ default arrangements (e.g. Q Super) and other funds/insurers have not activated the pandemic exclusion clauses inherited from previous insurance arrangements (e.g. TAL with UniSuper, NGS Super, TWU Super and Prime Super). HESTA, Colonial First State and Care Super have also announced the removal of their limited pandemic exclusions. The funds should amend their Product Disclosure Statements to reflect the changes.
But none of the group policies have general exclusions for Covid-19-related illnesses and none have general exclusions for pandemics-such as exist in some travel insurance policies.
Life insurers will still make underwriting decisions for individual policy applications and for those applying for extra units of cover in group policies, but it is simply not correct to say that many (if any) super fund members will be left without valuable life and disability cover.
There have been no reported claim rejections to date and very few are likely in the future.
Insurance and superannuation can be hard to understand at the best of times. In the current Coronavirus climate, it really is important for all parties to make sure that the information they put out in the public arena is accurate and does not cause confusion or panic the horses.
