Hi everyone, we are talking about Total Permanent Disability, a potential claimable condition on most UK Critical Illness Contracts. We are talking about how TPD claims work and also the difficulties that can be experienced in placing a claim for this condition.
This episode is taking a different approach to usual. As you know we love protection insurance and getting as many people as possible to take it out. But, you will hear this time that both of us are very on the fence as to whether we would recommend someone includes TPD in their critical illness cover, or even take it out ourselves.
The key takeaways:
- In 2022 only 70% of TPD claims were successful.
- Watch out for TPD definitions and exclusions when you are reviewing a client’s critical illness cover.
- It’s worthwhile taking that bit of extra time to explain the limitation of TPD to your clients, so that there is less confusion over whether they can make a claim.
Next time I will be joined by Debbie Smith from Swiss Re and we will be talking about long term income protection claims and what the statistics are showing us.
Remember, if you are listening to this as part of your work, you can claim a CPD certificate on our website, thanks to our sponsors Octo Members.
If you want to know more about how to arrange protection insurance, take a look at my 13 hour CPD Protection Insurance in Practice course here and 1 hour CPD Protection Competency Exam here.
Kathryn (00:06):
Hi everybody. We are on season eight, episode seven and today I have Matt ran back with me. Hi Matt.
Matt (00:12):
Good morning. How are you keeping?
Kathryn (00:14):
I am very good, thank you. We’ve just had half term, I know this episode will be going out in December, but we’ve just had half term where we are, so I’ve had a lovely week with the kids. Probably more shattered than before we actually started the half term, but it’s been just really, really nice to just do a lot of family stuff together. How are you? How’s everyone on your side?
Matt (00:32):
Yeah, it’s not too bad at all. It’ll come no surprise to anybody listening and to yourself in particular that off on a holiday on Friday. So the holiday,
Kathryn (00:43):
So we all get to be jealous while it’s flooding here. And you are in some assuming some gorgeously, sunshiney place.
Matt (00:48):
Well, yeah, it’s the last one of 2023, which is a bit of a shame really. Last holiday of 2023. Well yeah, I think so. It should be warmer and drier than it is in the northwest of England, let me put it that way. Temperatures around 25 26, which is a bit of a giveaway of where of goat, where we’re going, Canary Islands. But yeah, it should be fun. It’s nice to get away at this time of year. Christmas coming up as well. It’s nice. But then of course you’ve got the January and February to get through, but hey ho, life moves on. Yeah,
Kathryn (01:30):
Absolutely. Well I hope you have a lovely holiday. Thank you very much. And yeah, I’ll be cursing you when it’s really, really rainy here and windy and voluntary.
Matt (01:42):
Not sure which is
Kathryn (01:43):
The worst
Matt (01:44):
Either way.
Kathryn (01:45):
Absolutely. Well today everybody, we are talking about total permanent disability cover, which is a claimable condition with most UK critical illness policies. This is the Practical Protection Podcast. So Matt, can you start us off please by explaining to us what total permanent disability is?
Matt (02:11):
Yeah, absolutely. Well, as you know, the industry loves to use abbreviations and so on and so forth. So you’re going to have total and permanent disability TPD, and it’s also known very commonly as permanent total disability PTD. But they are effectively one and the same. Basically a lot of our listeners, I hopefully will know it’s a benefit that pays out a lump sum. If you have an illness or injury, that means you are permanently incapacitated from your work or daily life for the rest of your life. So I’ve said permanently, I’ve also reemphasized it with the rest of your life because an important feature and important consideration of somebody’s, I believe selling the product or the rider, maybe I should say rider rather than absolute product and particularly explaining the pros and cons to somebody who you feel that this would benefit.
(03:17):
It’s an interesting point, but I think one of the challenges that we have is that the success of the claim is much more determined on the resulting impact of the condition as opposed to the condition itself. And that is a subtle difference, but a very important one, critical illness where we see this policy, this rider, hence why I say rider, really sold alongside, pays out often on, well it’s raised on Dera really is the paying out on the satisfying one of the policy conditions, sorry, one of the events medical conditions that is actually outlined in the policy. So heart attack of necessary severity, stroke, multiple sclerosis, there’s many, many, many of them, everybody knows now. But this one is really is paid out on the impact of a particular medical condition, not the actual medical condition itself. And I think that’s important just to think about there.
(04:28):
As I’ve said, TPD is an integral part of critical illness. If I can just go back to my days when critical illness was, believe it or not, well first brought into this country, of course everybody knows it was actually developed in South Africa, but working as country TPD from memory was around certainly in those days, but you could almost see it as an important benefit then because you only had four or five main conditions covered by Credit Karma policy. And of course I think the question would’ve been in those days, well okay, somebody has a heart attack, we should be paying in most circumstances, stroke multiple sclerosis, so on and so forth. But what about if somebody suffers from something else that’s not, and it’s a very nasty disease but isn’t actually covered by those five or six medical conditions. So really TPD was brought in I believe, on the basis of making the cover more holistic, more wide ranging, but within trying to do that of course became rather vague.
(05:49):
And I would then say in today’s modern pre products that the mainstream ones anyway anyway, covering 40 50 critical illness, different critical illnesses where TPD actually lies within that kind of development these days. However, I’m going to leave that one to likes of you, Kathryn really, and the people who produce the products, whether it really has a place these days. However, I think one of the challenges that TPD has is if I could just go back to what I said at the very, very beginning, if you have illness or injury, that means you are permanently incapacitated and I added in for the rest of your life. So what does permanent actually mean and how do particularly claims assessors when they’re presented with a scenario, a particular scenario, how can they judge that permanency? And therein lies one of the biggest conundrums I think that is out in our industry at the moment in terms of claims handling, but permanently literally means that the permanence of whatever’s happened following the medical event that it will remain with a person throughout his or her lifetime.
Kathryn (07:19):
Yes.
Matt (07:19):
And that’s pretty important to say the least. I
Kathryn (07:24):
Think a probably good example there if I’ll just jump in, obviously from my
Matt (07:27):
Experiences
Kathryn (07:28):
As an example, and not due to saying that my dad didn’t have critical illness cover, unfortunately my dad, he’d had his critical, he was in the police so he had critical illness cover through the police, but then when he’d retired and things like that, he was about, I think he was something like six months off his diagnosis and he would’ve would’ve had his payout. But so if anybody who isn’t familiar, my dad has that and he’s quite poorly with it now. And so that would be something that on the total parent’s ability, usually based upon your ability to do your own occupation. So that does bring in a lot of different things in terms of how they would be assessed in terms of being given the policy in the first place, how it’d be underwritten and the terms you’d be given for the cover and then also at the claim stage, what that would mean.
(08:18):
So say like with my dad when he was a police officer and well he was a police officer, then moved to his same role but in the cities in civil service. And so he became a point where he couldn’t continue working anymore. And that would be, it’s a progressive condition. It’s not ever going to be recoverable from. So that I’m going to say that was should with a little bunny ears around it with my hands be quite a straightforward claim on something which would be an own occupation definition when it comes to total permanent disability. But one thing I’ll bring in from advisor’s point of view is that obviously there’s plenty of times that people come to me to review their cover. Obviously sometimes they are my own clients so I’m very familiar with their circumstances. But sometimes people just randomly will reach out to you, they’ve got things in place, they’ve been there for a while ends, you then figure out what needs to happen and obviously when you’re reviewing the cover and it’s always worth really keeping an eye out on the TPD things, I’ve got a couple of cases that I stand out in my mind with that.
(09:24):
So as an example, I had somebody that was supporting and they had critical illness cover already with TPD in it and their TPD said that it was suited occupation. So I was looking through it and I was just like, we’re doing everything and I’ve gone through their circumstances and there was nothing that they told me health-wise, anything else that made me think why would this be occupation wise, why is this suited occupation? So then we obviously had a chat, I was like, why was it done like this? And it ended up with a person being in a bit of a high risk job at one point. So they’d given at the time when it was done, they’d had total parent disability on suited occupation, which I will explain the difference between own and suited and and some stage. And it meant that I said to them, right?
(10:08):
I was like, well really now that you’re not in that position, we really want to get you one that doesn’t have that we want to own occupation. But in this situation, this person was, they had had some depression since the original policy. So then we had, and it’s a really hard thing from advice, we then had decision, do you keep the original critical illness cover with a suited occupation, total permanent disability or do you go for a new policy that will have a mental health exclusion on the total permanent disability? And that’s not to say that mental health would be excluded from the entire critical illness contract, it’s just that TPD. So most critical illness contracts are at least 10 or 50 60 conditions. TPD is just one of them. You still cover for everything else. And the insurer just says on that one claimable condition, we’re potentially going to put an exclusion on it due to health condition.
(10:57):
Sometimes they won’t offer total permanent disability depending upon the situation. And sometimes we’ll have this thing called own occupation suited occupation or any occupation. So I try and use this as an example. So let’s say own occupation, I’m an advisor. If I’m not able to be an advisor ever again due to my health, then it’ll pay out or should pay out on suited occupation. They’re going to look at what I do. So I’m often sat at a desk, I’m using a computer, I’m talking to people, could I do that somewhere else? That could be a case of could I work as an administrator in a GP surgery, could I go work on the tools at Tesco? It’s just similar kind of what kind of duties could I potentially do? Can I still interact with people? Can I still use things? And then any occupation, there literally could be, can I go be an astronaut? It’s such a, and they get progressively harder to claim on as we go along with them. And I think that’s sometimes when we’re saying there about it maybe being broken is that thing of it does get more and more tricky. I mean majority of UK contracts now would be really more own occupation. I think that would be right Matt, we don’t really tend to see that, but it’s more the older ones we’d maybe be seeing that kind of terminology. And you ideally always want the own occupation definition.
Matt (12:26):
I think you’re absolutely right. Yeah. A lot of the difficulty in claims are from older policies where a lot of these, with the marketeers, I take my hat off them generally, but when the marketeers trying to be helpful and therefore give greater access, putting more people to have TDS actually made it an awful lot more complicated at claim stage. And let’s be honest with you, some with claims policy comes in, can I claim on my benefit 10 years, 15 years after the policy was sold, can the claim possible claim and can the client honestly remember
Kathryn (13:13):
All the aspects of TPD and stuff? T and people also as well, we’ve had it a few times where people could claim on TPD and they just haven’t even realized and then you’re like quickly, let’s do this, let’s get it sorted kind of thing.
Matt (13:27):
Oh that’s absolute classic. I mean we’ve with a claims hat on, you see that on critical illness, basic critical illness conditions. It’s amazing. And of course the absolute classic is waiver of premium. People do completely forget that they have a waiver of premium. But yeah, I’ve heard of seen many a critical illness claim where, oh actually I’ve had a heart attack. Oh I’ve for, I’ve forgotten what a critical illness policy. And that feeds into a lot of topical debate around annual statements and following up reviews, annual reviews with your client, absolutely less. It feeds into many, many aspects of our financial services role if you like.
Kathryn (14:19):
Absolutely. We’ve had it before with people with cancers where it’s not specifically being, it doesn’t, obviously breast cancer, you have the word cancer in the name, but with some of them, they don’t always have the cancer actually in the name of the diagnosis, even though they would’ve been told at some point cancer. But they sometimes get really focused on the name of what’s the diagnosis is and then you suddenly say to them, well, you do realize that we should be going for this. But yeah, with the TPD side of things, as you say, it’s really hard. And I think I tend liken because I always try and give people lots and lots of warnings. So I think I’ve said this before with critical illness cover I’ll say of specified severity and I’ll try and give an example and I do sort of like the same with TPD and basically I will say to people, well, I’m going to come into a question as soon as to whether or not we would have it or not.
(15:09):
So I won’t give everything away, but I liken it kind of to the PIP assessments in some ways in my mind. So that’s a personal independence payment that you get from the government in the uk if you are disabled and you can’t possibly can’t work, but you’re really struggling with your health due to some health condition. And there’s lots of things like it’ll be things like can you, and I’m not saying these are definitely what you’d be asked, but it’s things like, can you walk this kind of distance and aided, can you clothe yourself? Can you prepare yourself a meal so that it’s that kind of a question set that can really come in a little bit different though with the TPD side because obviously when it’s own occupation, obviously being able to feed yourself doesn’t come into the question of can you still do your job?
(15:52):
Which I think in some ways makes it even more debatable and harder because with the amount of adaptations that you can have now through work, especially if you’re on a computer type role, there is a phenomenal amount of change that a company can potentially do. Not all of them want to obviously, but you can potentially do to support someone to work as long as possible. So I can understand how it can sometimes be quite great, but we have that, we have the ones where it’s own occupation, but then there’s some people, especially if somebody isn’t working, maybe they’re a student, maybe they’re house person, maybe they are unemployed that they’ll be given TPD on what’s known as a working tasks definition. And that’s the one I think or activities of daily living definition. And I think that’s the one that’s much more like the pip, which would be where, how far can you walk, can you look after yourself? Things like that.
Matt (16:47):
No, no, I totally agree. Yeah. Okay. I mean it’s interesting you’ve mentioned a lot of points there and
Kathryn (16:55):
Sorry I’ve gone off on a bit of a circle. I haven’t told
Matt (16:59):
You haven to all, but some of the points that you raise, I probably, well like to add a little bit in now I think that some people out there may think, well, Matt’s been talking about permanency and total and rider is called permanent and total as an insurer ever, ever going to pay out on these. Now the reality is that there is, particularly these days in the last five years or so, insurers have become far more reasonable realizing that TPD is a difficult benefit to judge a claim. So I would just say that some of the wordings these days that I’ve picked up on just to give some comfort to clients and advisors that a specialist, I’m going to read this out, a specialist must reasonably expect, so underline, reasonably expect the disability will last for life with no prospect of improvement irrespective of where the cover ends or when the life insured expects to retire. So there is a big reasonableness if I can spit it out, issue here and a specialist or a claims assistant not simply turn around and say no, it has to be a reasonable explanation and a detailed explanation of why a claim cannot be paid. More importantly or more importantly, which I’ll go into a little bit later on is why a claim cannot be paid now
(18:42):
At this present time.
Kathryn (18:44):
I was going to say you say that Matt. Oh no, I was going to mention this a bit later but I sorry, bring it in now. I think it’s quite pertinent to me now, but I have been involved in obviously in a couple of TPD claims and I do love insurance. I think insurance is fantastic. I think our successful claim payouts high nineties across obviously most products is brilliant in the protection insurance. But the TPD ones that I’ve been involved in, I have to say there were nothing short of shocking behavior from the insurers to the point where, because the reason I’m being it now, you said about the specialist where we’d had it, where the insurers and the claims assessors were challenging the specialists saying that they were getting it wrong and almost demanding that they do more surgery even though the specialist said this will not more treatments isn’t going to make this person better, there’s no point. It’s just putting them unnecessarily through treatment that can be dangerous at times and things like that. And the insurers, it was that kind of thing where I say majority of claims people and I’m sure in the majority of situations claims people are absolutely fantastic, but on the TPD side, maybe we hit a couple of really, really bad situations with it, but it was, they’re the only times really where I’ve thought this really isn’t okay. And I’m going to have to really get some stern words in
Matt (20:20):
With people. If I take literally what has just been said, I am amazed about an insurer saying they’re not going to pay out unless more surgery surgery is done. I’m amazed.
Kathryn (20:38):
Yeah,
Matt (20:39):
We had, when I had control over an insurance company, that just would not have happened. Not surgery, no. Maybe have they had all the types of treatment that is available?
Kathryn (20:51):
Yeah, oh yeah, I completely understand that. But no.
Matt (20:53):
Or adaptive workplaces or things like that, but not surgery.
Kathryn (20:57):
It was repeating previous treatments that’s had been done and basically, well, why don’t you just do it again and see if, and it was just a case of no. And it also became a little bit a case of, and obviously claims assessors are brilliant, I’ve seen everything. But at the same point there was a little bit of a case of like, look, this is literally a consultant surgeon and medical professional who’s done many, many years of stuff and it’s case of you are not a medical professional, you’re very good at doing claims, you’re very good at obviously following the rules that you need to set and everything. But it did become a little bit how have we got to the point where a claims person in a sense has the authority to be able to say to somebody who is really top of their field to go, well you’ve not done enough. And that was kind of like it really blurred sort of I’m not meaning really hope. That doesn’t mean I don’t want to come across if I’m insulting anybody in claims, I think I say claims people fantastic, incredibly good at their job. This situation, two situations I’m thinking of was absolutely horrendous. But you just thought there’s got to be a point where you go, you know what? Actually no, there is a specialist here who has more training than a claims person and they aren’t saying very specifically,
Matt (22:11):
I think I’m going to jump in here, Kathryn, sorry, I would be 99.9% sure that in the particular circumstances that you mentioned then that the claims assessor would have been in consultation with their chief medical officer.
Kathryn (22:29):
Yeah, no, I can imagine that.
Matt (22:31):
So the claims
Kathryn (22:32):
That’s unfair point, yeah.
Matt (22:34):
Is merely acting on behalf of, if you like the chief medical officer. I would also throw in, and by the way I could be wrong, but I’d be incredibly surprised if they were going around to that type of decision that they didn’t have their own consultant in the background. I would also say that in contrast to the one, the situation that you just mentioned where a chief, a consultant, medical professional was being questioned, I’ve also seen cases where claims assessors, no doubt with the backup of their chief medical officer have actually paid claims and disagreed with the client’s actual doctor,
Kathryn (23:25):
Which is brilliant and I think it is very fair.
Matt (23:27):
What I’m trying to say is there’s two ways of looking at this.
Kathryn (23:30):
I was going to say it’s very fair what you’re saying. Yeah,
Matt (23:33):
I can guarantee the work does work both ways.
Kathryn (23:36):
Well we are going to see in a sense it is always going to be the negative ones. It’s like with anything in the media, isn’t it? You get a negative one and it ends up being so a lot of the time it’s so extreme and so negative that you’re just like, this can’t possibly be happening and this is what we had in this situation. So I know that it’s not sort like the go-to that would genuinely happen. I can’t
Matt (23:57):
Believe it’s
Kathryn (23:57):
Norm, it’s not. I mean it was just, I’ll tell you about it all in detail elsewhere from here matter, we’re not on recording this particular and I tell people would trust me in the sense of saying just nobody would look at it sensibly. And when you said about the CMO being involved as well, and you’re right, I’m sure the CMO was involved, but even then it was the case. I appreciate the CMO involved but not a specialist on that individual, not the one who’s performed the previous surgery, not seeing what’s going on inside. And so I think again, there is that little bit of, but that’s what we’re saying, isn’t it? This is the whole point of this debate on TPD is that we’re saying it’s a bit everywhere.
Matt (24:42):
No, absolutely. I mean I’ve also been involved in claims over the years where I can’t necessarily say it’s TPD, I’ll have to be honest with you, but in situations these would be living benefits. It wouldn’t be death claims, but in living benefits probably with critical illness, I would’ve to say the insurer on very odd occasion has actually got their chief medical officer to talk to the claimants medical professional. Particularly if they’re both consultants, they can go off record and discuss it between themselves and agree because as you quite rightly say that if a chief medical officer stands by definition, they’re stood away from the absolute circumstance of a given case. But generally nine times out of 10 claims assessors can bridge that gap, but when it can’t, the two consultants get together and put their views together and hopefully come out with an agreement to the way forward. So that can happen as well.
Kathryn (25:53):
Yeah, and I think there’s also gray committees, isn’t there any shows as well? If there is a little bit of a, are we doing this? We’re not doing this, but I think we’ve gone completely out of sync in terms of what we were going to do, which is really good.
Matt (26:06):
It’s important to talk about what goes on behind the scenes and what necessarily going to be obvious to many advisors out there that these things do go on in a positive way as well as in this horrendous case that you just mentioned.
Kathryn (26:23):
Honestly, it would be an incredible case study, but with anything like this, it is always really awkward asking for case studies and stuff like that. I don’t really and Jones that, but I say I’ll tell you about it in a time. But if we go back on track for a second, so with TPD, we were saying you will sometimes get exclusions on it, sometimes it’s not offered at all As an underwriter, what kind of things would be in someone’s circumstances that would make you think, right, I am going to possibly put an exclusion on the TPD. Everybody listening, it is just on the TPD aspect or potentially not offer the TPD.
Matt (27:00):
Okay, I would probably draw a parallel to a degree, but noticing the permanence part of the definition for TPDI draw it back to income protection in a way except one obviously income protection. You do not have to be permanently disabled to claim on income protection. That’s the whole point of income protection and there’s a permanence here. So there are many crossovers I would say to income protection underwriting. What I would say is that rather like, and maybe controversially income protection underwriting is not particularly sophisticated. TPD underwriting is less sophisticated than that.
Kathryn (27:49):
So
Matt (27:50):
In other words, you will not get an underwriter or I would have to say, and I might get shot down by people that maybe likes to underwrite me for saying this, I do appreciate the insurers have an awful lot to, they actually separate the rules, but not a lot of time is taken in the thinking behind a decision on an automatic underwriting system. So in other words, you could have some what would be quite minor in minor musculoskeletal conditions or mental health conditions. Ones that particularly aren’t covered by ip, sorry, that are covered by IP but not by critical getting excluded or well, I would suggest probably excluded rather than rated because ratings on TPD are not sophisticated by any stretch of imagination. So that actually helps your question because you see people with minor shoulder injury a couple of years ago and that’ll be excluded from TPD. Yeah,
Kathryn (29:04):
Well mental health’s a really common one isn’t it, to have an exclusion on file.
Matt (29:07):
Yeah. So all I would say is there that really, it’s probably the nature of what is out in the marketplace in terms of the underwriting and TPD, I think partly to be fair, we do live in a commercial world and for the premium that is paid for TPD, just TPD on its own, then are insurers really going to put lot of money into developing sophisticated systems to actually take that on board or not. Now
Kathryn (29:39):
It’s tricky because
Matt (29:40):
Td, it’s also, but it’s the way of the world and has been for many, many, many, many years. Sorry Kathryn, go
Kathryn (29:48):
On. Absolutely. No, no, of course. And I think for me, when I’m looking at TPD in terms of exclusions and things like that, what I tend to think as an advisor is that if I’m going to have, if it’s T, if I look at TPD waiver of premium and income protection, if I’m going to have an exclusion on one, I’m probably going to have exclusion on all of them. That’s my general viewpoint on it. But definitely mental health is quite a common one to have on that, as you say. So certain injuries in certain areas can also be, I dunno if this is still common, but I remember again a few years ago I was reviewing somebody’s cover and I noticed that there was an occupational exclusion on their original critical illness TPD because I believe they were an oyster fisherman I want to say.
(30:35):
And they did scuba diving and so I was just like, well, did you know that that was there and it was hidden about in the policy document, it was a really massive policy document and all integrated together and I think it was on page 15 or something and it was just really hidden and they’re like, we had no idea that was there. So I just moved them to a different insurer that didn’t do it. So again, for advisors do keep an eye on that as well. Don’t just take it for granted, oh they’ve got TPD, right, they’ve got the best thing there or double check those definitions. What are they looking like? Has there been anything extra done on them? But I’m at the point now that I think is a good one to put you on the spot a little bit Matt, and I’ll give my thoughts too, but if you were applying for critical illness today, Matt, and you had the option to add TPD on or not, because some insurers include it as standard, some of them is a paid for extra. Would you include it?
Matt (31:27):
Okay, I’m going to step around the question just a little and just give a little bit of background that at an underwriting seminar run by Swiss free good 10 years ago now, I was luckily enough to be invited to the panel and one of the expert panel if you like, and one of the questions was row is about TPD and one of the things here notice is 10 years ago and I piped up and said TPD is a broken product. It was misconceived to start with, it’s poorly understood by everybody and it’s causes an audit amount of blood, sweat and tears more concerned. And I left it at that. There were a few cheers from the audience I have to say, just so I wasn’t alone, my dear friend Jerry Brown was in the audience and he didn’t say anything. Actually
Kathryn (32:28):
I was going to say, I can imagine him playing devil’s advocate to you when sort of going the opposite way.
Matt (32:33):
God bless, but I’d be surprised if he does or did he didn’t say anything that day. God bless you. Anyway, I’m now going to answer your question. In principle, I would not buy TPD, no. If the cost then I’m going to have to caveat it slightly. If the cost was two pounds a month, I really have no idea how much TPD costs these days. Sorry, I’m out of that part of the world.
Kathryn (33:08):
It ranges a lot.
Matt (33:08):
Yeah, I’m sure it does. I’m sure it does. Then I might say, sods law, it’s going to happen to me therefore for two pound a month I’ll buy it. But in principle and what I think about the product itself then no, I wouldn’t buy it. I had to stick by my principles of 10 years ago. To be honest with you. Nothing ultimately has changed. I think to be fair, I say nothing has changed as you do before these podcasts. Just do a little bit of digging around and definitely been an improvement in terms of the clarity of what insurers will and will won’t pay out for. My concern is that do advisors really explain about TPD and the potential difficulties? I know that you and I have had that discussion and I think it’s very much worthwhile you putting that into this podcast. And also as I’ve said before, many claims it is quite unusual to have a no-knock TPD claim through illness anyway early on in the policy and who really is going to remember five years, 10 years, 15 years later, quite the ins and outs of the TPDI
Kathryn (34:32):
Suppose really important things with that as well. Like you’re saying, if it’s unlikely to be in the first 10, 15 years, I mean the times that somebody young, I mean obviously people who are young are going to can have significant health conditions, but I sometimes wonder with TPD in a sense is that if you are, is it more sort of a case of the only time it’s a certain really is if don’t use this term lightly is if you were to become quadriplegic if you were in a horrific car accident or fall
Matt (34:59):
Or something like that. Yeah, that’s why I say illness by the way. Yeah,
Kathryn (35:02):
That’s probably more because by the time you’re getting old enough. So my dad with the Parkinson’s, like we were saying, he could potentially claim on TPD but you wouldn’t, he’d have claimed on Parkinson’s as part of the critical illness contracts. Yeah, absolutely. So by the time you’re getting there, the other things that are potentially going to stop you working are probably covered anyway by the critical illness contracts. So like with TPD, it does kind of feel lost. So as an advisor, if it is a paid for extra, just like you should do with wave premium is you need to let the person know really what that price difference is. This is what it costs to have this, this is what it costs to not have this wave of premium. We can have it from literally a couple of pence a month, which is nothing in a sense for a lot of people it can go up to quite a few pounds per month, total permanent disability. I’ve easily seen it being over 10, 15 pounds per month to have TPD and that’s when I start to really think is this worth it 15 pounds on something that in all likelihood it is going to be one of the other things. The highest claim conditions are cancer, heart attack, stroke, I think shortly followed by closely followed by multiple sclerosis I believe on critical illness stats.
(36:15):
Now I don’t know how the percentage of how many people need or can claim on the TPD side of it. So what I do as an advisor, I give people the choice, I inform as with anything as an advisor you inform them on what’s available to them, you record it. If they want to have the TPD, that’s absolutely fine. Just make sure that when you recording your documentation to them that you say this was included for an extra price. I did give you the option to include it or not include it. You felt it was worthwhile. If you don’t include it, say I did offer you the option of TPD, but you decided against it, it would’ve cost this much if you did include it. So it’s very clear either which way is that you have been involved in that discussion, you have taken the time and that I was incredibly, it’s what
Matt (37:05):
I said, it’s incredibly important. I sorry, I didn’t want to distract you from what you were saying. Yeah,
Kathryn (37:12):
No, I was just saying
Matt (37:12):
Absolutely. I’ve also been involved in expert witness cases where advisors have not done that and it has led to a lot of problems. So that’s why I
Kathryn (37:25):
No, it’s fine. I was going to say just be proud reality.
Matt (37:28):
This can come back and bite advisors on the bottom. Yeah,
Kathryn (37:31):
Be proud of your work, be proud of what you’ve done, the amount of advice you’re doing, you’re doing all these extra bits and the more you do and the more you engage, the more they’ll remember you as well. So the more likely to come back and speak to you again in the future. But in terms of me personally, I’m the other side in the sense of if it was 10 15 pound a month, I have to say I would really question it. But if we’re going up to a five or maybe up to a 10 a month, I’ll probably be having it because I’m very much a case of if I don’t have it, as you were saying, SOD law, if I don’t have it, it’s the thing that I would need to claim on. And it’s like, obviously I know we did a podcast recently, but the child shield for MetLife, it’s all about covering the children for broken bones and things like that. I’ve got it and covered all my children on it because I was saying to myself and I always think if I don’t do this then they will have a broken bone. So at the moment I’m not just ensuring them in case of there’s a been a financial payout, but I’m just ensuring them against the ether and the vibes from the universe. So hopefully they won’t break any bones, but that’s the way that I look at it. But
Matt (38:33):
There’s lot to be said for that, I’m telling you.
Kathryn (38:35):
Yeah, no, absolutely.
Matt (38:37):
It’s more about knowing your client, isn’t it? There’s, it’s giving them very clear choices and if the client doesn’t want it for goodness sake, put it in writing that the discussion has been had. Sorry Kathryn, I
Kathryn (38:50):
Definitely you should do and all
Matt (38:52):
What you have said,
Kathryn (38:53):
No, no, no, you should do. And also what I would say is for firms in that you should really in terms of fact find, so in case anybody’s listening who isn’t in our industry, but I imagine you probably are with you listening to the specific ones, it’s quite a specific technical episode your fact find. So the fact find is a thing that we do which records a lot of our discussion with the clients. It’s like a personal diary sense in some ways with the advisor noting down everything we need to, there should be somewhere in there to prompt advisors yourself or any of your team to go wave of premium. Why have you done it? Why haven’t you done it TPD, why have you done it? Why haven’t you done it? Just so that you have that very clear thing. And I also say as well, I’m a bit of a pain.
(39:33):
I’m sure lots of people are very grateful. They don’t sit under my compliance because if someone says TPD and why have you done it, why haven’t you done it? And the answer is client not interested, it’s a case of well that’s only half the message and client not interested. That leaves it open to what did you even discuss it? I mean client not interested, but I gave them the price of this and I’m going to put it in my report. It just gives you that little extra backing because like we’ve said plenty of times and it is worth remembering as well in terms of consumer duty, in terms of everything, in terms of data protection, lots of other things is that the right to complaints to complain from a client is there’s obviously a few different situations, but one of the most recent ones is they can complain within three years of when they became reasonably aware that they had a right to complain.
(40:24):
So that’s not three years from the date of what you’ve done is three years from when they became aware that they could potentially complain. So you could be 27 years down the line, you could be 15, you could be 35 years down the line. And if they say, well I only realized in the last two years because I spoke to a different advisor and they’ve told me that you’ve done me wrong, they have that right to make that claim and that complaint. So whether or not it’s valid or not, it’s a different thing. But the key thing is at that point you’re going to be handling a complaint, it might go to the falls for the financial ombudsman service, you want to have your documentation there. And as with anything, if you’ve got a statement there that says I offer TPD, it was this much, the client decided against it and it was in my report to them versus client wasn’t interested, the first one is far, far stronger in being able to protect yourself going forward against a complaint.
Matt (41:22):
I totally utterly agree. I’ve already mentioned that I’ve done expert witness cases that are involved exactly the scenarios that you’ve warned people against. And also there are a couple of other things here. Totally agree about the time duration and complaints because quite often the legal cases I get involved in are something like 10 to 15 years after policy was sold. And also I don’t want to be a complete red flag waiver, but also professional indemnity. Just think what are the professional indemnity insurance will have if you have to settle out of court.
Kathryn (41:59):
Yep. Well there is actually as well. So this came to my attention and luckily, so at Kira we keep all data indefinitely and there has been obviously with new data protection also there’s been this thing about seven years do you get rid of them and things like that. What people really need to be careful of, especially in our insurance space is that some professional indemnity providers now have specific clauses where they will say, if you haven’t kept your documents, we won’t support you in event of a claim.
Matt (42:28):
It’s interesting.
Kathryn (42:29):
So it’s really, really important. Whatever you’re doing, just either you’re going to have to make sure that you’ve got an insurer that’s happy for your professional indemnity to ensure if you don’t have the documents or you need to just make sure that you are very clear and that should all be in terms of your toba. So your terms of business agreement that you give to clients in the initial stages in terms of that data and the privacy policy as well and data policy that should be given to all clients just explaining why would you keep it, how long you keep it for. And personally I think it would be very, very difficult to not keep copies of everything because as we say in terms of a complaint now it can happen at any point. So it’s not even like we can say it has to be within the first three years of advice, it can just be forever.
(43:21):
So you’re going to really need to keep those documents for as long as possible, but do what your compliance and data protection person tells you. I don’t want any compliance or data protection people telling me off. So I’m going to say just do what they say. That’s my opinion and what we do. But there’s very specific arguments for it. But as we are coming towards the end of the podcast, Matt, we’ve been talking about TPD, I mean saying sort of the good parts of it. I mean I think we have focused quite a bit. I have to say we’ve focused on the bits where it’s not working and I think that’s fair to say because for the majority of the time it isn’t working great. But we do have statistics I believe. I think you’ve got a rough statistic in terms of success rates of claim.
Matt (44:02):
I don’t want to be sued by a nakey, it has to be said, but I’ll
Kathryn (44:10):
Be fine.
Matt (44:11):
I’m sure he will be as well as he lovely chap. But I would like to pull something from a headline, I suppose it’s in the public domain really. He has mentioned some statistics that he mentioned. He claimed the cover forum summit very recently where in 2022 the average claims paid across the board was approximately 92%. Kathryn, you’ve mentioned that already. However, when specifically considering total and permanent disability claims, the payout rate was only 70.3%, which I think which
Kathryn (44:49):
Is 70% is better than lower, but that’s still incredibly low compared to, I know it’s obviously 92% across the board. I think generally life and critical illness tends to be more 95% and over generally it’s usually 97 90. I think income protection we can sometimes get a bit lower because again and Chris Clean possibly is a bit lower than life just because again, people understanding when and how they can make claims and obviously then claims not actually going through and obviously potentially other reasons as well. But if I remember rightly as well, so I know you mentioned Jerry, Jerry Brown earlier I was at a cover event and this was pre pandemic, so we’re talking, it was either very, very beginning like February, 2020 or it would’ve been 2019 when Jerry was there and he was talking about TPD claims and he was talking about a case study again where it wasn’t working well and I’m sure around that time he also said about a 70%.
(45:54):
So I know it’s not a long timeframe, but we’ve got about a three year period there, but there’s been no improvement to that percentage and I think all of us would say a 70% success rate isn’t where we’d want to be as an industry. We would want to be doing much higher. So maybe there just needs to be much better clarity over things at times and whether or not that’s the way that advisors explain TPD, I’m sure there is definitely more that advisors can do in terms of explaining TPD. But then I think as well we’ve got those ones where obviously I’ve mentioned, and I’ve been involved in a couple where TPD haven’t gone great, you’ve had somewhere they’ve gone brilliant. But I think there’s also, there’s bound to be lots of other people who they don’t engage with advisors, they’ve done it all themselves.
(46:44):
They’re going for the claim themselves. It’s a very good point and obviously for the people that we’ve supported, we are there as advisors to go to the insurer as nicely as possible, stop it right now and behave, let’s get this sorted. We need to get this paid because they absolutely do have a right to claim and we’ve got the claims paid, but other people don’t necessarily have people in their corner to say either which way either, look, you’ve applied for this, but you know what, you’re not going to actually be able to make a claim or you’ve applied for this, you’ve been told no but you shouldn’t have been. So it’s just the way the industry works isn’t it? We’re not going to make a quick fix out of it, but I do think that advisors could explain more and I think insurers could do more to make the TPD claim process better. I don’t want to get told off by anyone, but
Matt (47:38):
No, well this always was going to be a bit of a tricky podcast. It let’s be honest. Yeah,
Kathryn (47:45):
We knew it weren’t going to be a controversial might be blacklisted at the end of it.
Matt (47:48):
Well possibly, but I mean at the end of the day when you’ve got a claim statistic of 70%, then we have to tell it as it is. There’s no two ways about it. Can I just add one thing, Kathryn? I know probably going on a bit, but I just wanted to, you mentioned it earlier as we’ve discussed TPD own occupation is now the most common definition used for that benefit and I just wanted to be absolutely a hundred percent sure this is a positive point I might add that insurers won’t be unreasonable in when they look at an own occupation claim. And what I mean by that is, for instance, if my job was selling, but as part of my skillset, I could do the filing,
(48:42):
Then an insurer will primarily look at your selling abilities and your ability to do that, not at your filing. I just wanted to make that short because the actual wording that’s used these days is unable to do their own occupation ever again and using the material and substantive duties that they perform within their own occupation and that can’t be reasonably left out or changed. So it is substantive. You’re not going to get a claim paid down by picking some obscure part of your job that you very, very rarely do or 5% or 10% of your time, maybe you do it, but it’s the material and the substantive areas. So please don’t think that insurers will or claims people, insurers will try and get out of a claim. Notice that word I used early doors around reasonableness.
Kathryn (49:40):
Yes, definitely.
Matt (49:41):
My view is knowing a very good number of claims people, albeit not across the industry, but primarily from my own history. And I know you’ve said the claims people do a good job and they do look at our 90% pluses around here, but these claims are pretty damn difficult and they can only work with the definitions and the policy wordings that they have been left with. I can put it that way now without any shadow of a doubt. One of the other areas I just want to touch on very, very briefly is I know Kevin Carl was one of the big voices around getting claim statistics out there in the market. I think generally it’s worked reasonably well, pretty well. Definitely. I think TPD is an interesting one note, go back to the permanency side of this and how difficult that is or some of the more topical medical disorders of the day at the moment tend to be chronic fatigue and fibromyalgia. And I know you and I have touched on these historically, Kathryn, but it is incredibly difficult at the moment with medical knowledge being where it is to actually define how permanent those disorders will be.
Kathryn (51:11):
Yes. Yeah, I can appreciate that. And it’s a tricky one. My mom has fibromyalgia, so I do understand that one
Matt (51:19):
Quite well.
Kathryn (51:20):
But it is a very, very tricky one because it’s not like I’m going about Parkinson’s. It’s not like Parkinson’s where you can go into the brain and you can see that all the dopamine levels dropping and all the different things. And again, with the stroke or anything like that, with the fibromyalgia, it’s obviously so much more on the sensitivity to touch and pain. And so I do appreciate that that is a much more difficult one to assess. Yeah,
Matt (51:46):
Absolutely. Straightforward. No, no, but maybe it’s the reason why particularly with these claim assessors seeing a lot of, well, I say a lot more than they used to, let me put it that way. It may be one of the reasons why, reasons why claims success isn’t as good as some of the others. It’s pretty damn difficult these days. TPD was designed a long time ago, the fundamental principles a long, long time ago when we don’t have the medical knowledge to say, well actually really is it permanent? We’re not going to write this person off when they’re in their thirties or forties. Is it really permanent? The medical thinking he says is, no, it’s not. Now you put an ancient product. I was around when that was, well, not TPD necessarily was around when critical illness came in. Goodness gracious. So I have an ancient, you put an ancient product design against a modern medical, modern medicine. My words aren’t coming out very well today. And potentially that is part of the issue that we have got in the success rate of those claims. I can’t say it’s everything by any stretch of the imagination, but it is part of it. So I go back, I’m going to be, I was a soothsayer in a previous 10 years ago to say it was broken. Now in that particular conference I said, either you scrap it or you completely redesign it.
(53:20):
And I think hopefully on the basis that you would buy product and many people do buy the product, then there is some use to it. I agree with that. I think the whole, this rider needs to be redesigned somehow. At my age, my creativity is no longer with me, but I think it certainly needs a very, very good looking at, I’m not talking about the claims process, I’m talking about the product design.
Kathryn (53:51):
No, I think that’s,
Matt (53:52):
Should I get off my bench now?
Kathryn (53:55):
No, no, no. I think it is a very, very valid point and I think it’s important to do these when we’re seeing parts of policies that aren’t working as we would want them to when we clearly as well have those claim statistics that we’ve both said there was three years roughly between those times that we’ve been looking at. And it’s not changed. That isn’t great. It’s something that we do want to see. Maybe there just needs to be a lot more clarity. But I do appreciate exactly what you’re saying in terms of sometimes the conditions that are there are very hard to be able to assess. But I think as with anything, we’re going to have extremes from all sides. I’ve obviously got some really extreme case studies that work great, but there’s going to be other ones like you’ve had where they were absolutely brilliant and actually they said, well, actually we think even more than what your consultant is in the NHS and we’re going to pay out for you.
(54:59):
So I think as with anything, probably because we’ll say this about underwriting, we, there’s about lots of things, much, much more of a middle ground. So these outliers in a sense shouldn’t really happen. It should all be as smooth as possible and then maybe we’ll be able to get those statistics better, hopefully. Fingers crossed. Well, I think that’s the end of the episode, so thank you for listening everybody, and thank you as always, Matt, for joining me Next time. I have Paul Bevin and Rachel Edwards joining me from various to discuss travel insurance underwriting. If you’d like a CPD certificate, please visit the website, practical protection dot code uk and we can get them thanks to our sponsors, the Okta members. Thank you so much for your time today, Matt.
Matt (55:42):
My pleasure. Lovely to speak to you.
Kathryn (55:44):
Thank you. Bye.
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