20 Mar 2020
Life Assurance policies and Coronavirus
Article provided by Risk Info - March 10, 2020
Insurers have confirmed there are no exclusions in existing life insurance policies that would prevent the policy paying out for a claim related to Coronavirus, if the policyholder has followed Government travel advice.
The World Health Organisation has declared the outbreak a global public health emergency and worldwide so far there have been around 113,000 cases reported with just under 4,000 deaths.
So, is there any effect on life insurance, TPD, Trauma and Income Protection policies? We asked a cross-section of life insurers.
The tone was set by the FSC (Financial Services Authority) which states on its website: “There are no exclusions in existing life insurance policies that would prevent the policy paying out for a claim related to Coronavirus, if you follow Government travel advice.”
FSC Senior Policy Manager Nick Kirwan says no-one should be concerned about their existing life insurance policies. “If you take out new life insurance, you can ask your life insurance company when your new cover will start.
… all life insurance companies have pandemic risk management plans in place …
“The life insurance industry is carefully monitoring the situation and all life insurance companies have pandemic risk management plans in place in line with APRA Prudential Practice Guide 233,” he says.
FSC’s Nick Kirwan …the life insurance industry is carefully monitoring…
Kirwan says these plans will ensure that if, for example large numbers of staff are absent from work, [then] essential functions such as dealing with claims and customer enquiries are prioritised.
Asked if he could see any likelihood in the future of this changing at all, Kirwan says they are continuing to monitor the situation “…but for now we don’t expect the situation to change, and not for existing individual life insurance policies”.
Life companies we’ve spoken with have reiterated that their clients would be covered.
A statement issued to Riskinfo from AMP Life says its customers should not be concerned about their life insurance policies in the circumstance they needed to claim in relation to Coronavirus.
“Claims are assessed against the terms and conditions of a customer’s policy. Our death insurance policies in almost all circumstances cover the insured for any cause of death, worldwide,” the insurer says.
“There are very limited exceptions where there are exclusions and customers would be notified of these as part of their policy documents.”
AMP Life says that in the event of an income protection claim, the policyholder must be ill or injured and as a result, unable to work.
“The cover of a policy is largely centred around the impact of illness on the insured, not the illness itself. If the impact of Coronavirus led to this outcome and other policy terms are met, then the customers would be entitled to claim. If customers are unsure about anything related to their policy, we welcome them to contact us.”
AMP also noted that newly insured lives would not be treated any differently.
As yet, it has not seen claims come through as a result of Coronavirus. However, the insurer is keeping a close eye on this.
At MLC Life Insurance a spokesman states that there are no exclusions in life insurance policies that would prevent payment of a claim related to a Coronavirus.
MLC says customers would also be covered for any TPD, Trauma or Income Protection as “… there are no exclusions on these benefits that would prevent payment of a claim related to a Coronavirus”.
And Neil Borthwick, head of claims, BT Life Insurance says that “BT’s life insurance policies cover existing and new customers for the Coronavirus.
“Customers who may have TPD, Trauma or Income Protection policies with BT are also covered. New customers are subject to our usual underwriting rules,” Borthwick says.
Over at AIA Australia, a spokesperson for both AIA and CommInsure said in response to questions that its “…on-sale retail life policies do not contain any exclusions for pandemics; so policyholders are covered in the event of their death from the virus”.
As to whether they are covered for TPD, Trauma or Income Protection insurance they may hold, the spokesperson said there are no specific exclusions for pandemics in on-sale retail life policies, “… so as with any claim, a policyholder would simply need to meet the eligibility criteria for the particular insurance benefits held through their policy”.
… we will take into account in our assessment any recent and proposed travel …
Asked if newly insured lives would be treated any differently, the insurer said. “For any new insurance applications we receive, we will take into account in our assessment any recent and proposed travel to countries where the Federal Government has raised its advice level to Do Not Travel as a result of COVID-19.”
AIA had not yet received any claims related to Coronavirus.
A ClearView spokesperson stated that existing life policy holders and those holding TPD, Trauma or Income Protection were all covered in the event of the virus and that newly insured lives would not be treated any differently. The virus was not having any impact on the insurer’s life policies.
Meanwhile, a TAL spokesperson confirmed that its retail policy holders are covered in the event of death from the virus.
“As with all claims, customers must have fulfilled their disclosure obligations and have met the terms of their specific policy in order to be eligible for a benefit payment,” the insurer notes.
As to TPD, Trauma or IP insurance, TAL says that if a customer becomes unwell and this impacts their ability to work beyond the duration of their waiting period, “…then subject to the terms and conditions of their specific policy, they should be able to claim income protection benefits”.
TAL notes that Lump Sum benefits like Trauma and TPD are intended to provide cover in the event of a serious health event that has material financial consequences for a life insured.
…the majority of those who suffer from the virus are likely to recover relatively quickly and with no permanent consequences…
“In the case of TPD, this would need to result in permanent impairment that prevents return to work. The majority of those who suffer from the virus are likely to recover relatively quickly and with no permanent consequences. Given this, neither Trauma or TPD covers specifically cover the … virus. However, in the event of serious and lasting secondary complications our policies may provide coverage in line with specific policy terms,” the insurer says.
In turn, newly insured lives would not be treated any differently under TAL policies, “…however, if an insured was already suffering from [the virus] at the time of application for their policy, then it is unlikely we would be able to offer new cover until the applicant returns to health,” it says. TAL says it has not yet received a Coronavirus related claim.
A statement from MetLife says it is “…committed to supporting existing policyholders and new applicants with their cover as the spread of … Coronavirus continues throughout Australia.
MetLife says it understands many Australians may be concerned about the impact of Coronavirus on their insurance cover. “We would like to reassure people that all MetLife’s existing Life, Total and Permanent Disability, Income Protection and Trauma policies provide cover for COVID-19, in accordance with the policy terms.
“There is nothing in the policy terms that prevents us from paying claims in these circumstances,” the statement says.
MetLife says that as more information comes to hand, “…new applicants may be required to disclose travel plans to affected countries as this may have an impact on their risk assessment”.
The insurer says that as the situation develops, it will be working with customers, partners and industry “… to ensure Australians have access to the cover they need”.
Integrity Life’s William Rogers, Head of Retail Product, says that any claim received by Integrity Life, including those where the cause of death is Coronavirus, will be assessed under its claims guidelines.
As to whether policy-holders are also covered for any TPD, Trauma or Income Protection insurance they may hold, Rogers said: “A life insured will be eligible for an income insurance benefit, if they are unable to work at full capacity for the waiting period, as a result of sickness or illness.
“It is understood that the Coronavirus … would fall under this. To be eligible for a TPD benefit, the life insured would need to satisfy the Own or Any Occupation definitions. If this occurs as a result of the illness, we will assess under Integrity claims procedures.”
He also notes that newly insured lives will not be treated any differently under Integrity’s policies.
Asked if Coronavirus was having any impact on their life policies, Rogers says currently it does not have any impact “… however, this is something that we are closely tracking”.
If you'd like more information or if there are any questions regarding your life assurance policy please speak to your PSK Financial Adviser today.
PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee. Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.