Evolving TPD to better support members

This article was first published on Financial Standard Super on Friday, 23 February 2024

Total and Permanent Disability (TPD) insurance in super provides an important financial safety net for those who need to claim. But there's a significant opportunity to help members better understand how TPD insurance works - and how they can get the most value from it.

Life after a TPD claim

At TAL, we're currently exploring ways to evolve default group TPD cover so it delivers a more positive member experience and better outcomes.

As part of this process, we recently conducted a confidential survey of 177 members from across our partner funds who had claimed under TPD insurance within the last five years. Our aim was to better understand the lived experience of these members following their claim, in areas such as their financial situation, health circumstances and capacity for returning to work.

In terms of demographics, 77% of respondents were aged 55 or over, with a 60/40 split between men and women. The leading claim causes were musculoskeletal (33%) and mental health (19%) conditions.

One of the myths around default TPD insurance is that it typically pays large benefits. But for three-quarters of the members we surveyed, their TPD benefit was less than $100,000. Similarly, there are views that the smaller benefits are too small to make a meaningful impact for members.

Pleasingly, half of all respondents said their TPD benefit has or will meet their financial needs - although many have drawn on other forms of financial support like sick leave, workers' compensation, income protection, and their savings or superannuation.

These insights reflect that maybe the real purpose of default TPD insurance could be better articulated as being a benefit that provides financial relief so claimants can manage their short-term loss of income, cover medical costs and, where appropriate, retrain for suitable work in a new occupational area, rather than the current perception of it being a benefit that will provide ongoing financial support for life.

To illustrate further, 14% of our survey respondents have already returned to work in some capacity - mostly in new roles requiring new skills. Another 6% plan to return to work in the future, while a further 31% haven't ruled it out as a possibility. This highlights an opportunity to connect TPD claimants with support services in areas like rehabilitation, mental health and work retraining, with a view to helping them re-enter the workforce in alternative roles when and if they're ready.

What's more, the vast majority of people in our study who have already used such services said it had made a positive impact.

Similarly, 80% of claimants who accessed financial advice to help them manage their claim found this to be helpful. And across the board, 59% of respondents said they would make use of financial advice if it was made available at claim time. This could be especially helpful for members who receive larger benefit payments or who are in a particularly vulnerable position following their claim.

The way forward, together

So, how can the industry work together to evolve TPD insurance so we can better assist members at what is potentially the most challenging time of their lives? One approach is to change the 'total and permanent disability' product label. This could realise an opportunity for trustees, with the support of insurers, to reposition how TPD cover is marketed and communicated, so we can educate members on how they can get the most value out of the cover.

By building a greater understanding of how TPD insurance works, it could also potentially help members overcome the psychological impact of being labelled as "totally and permanently disabled". Instead, we want to shift the conversation towards how we can help members make the most of life after their claim.

Another answer may lie in helping members access the right support after their claim. From our research, we know that members want greater access to rehabilitation, mental health and work retraining services at claim time, so we need to consider options that will help more members achieve a positive health outcome over the long term.

Part of this could involve deeper engagement between insurers and the medical community to build awareness of the role of TPD insurance and to collaborate on treatment approaches and occupational pathways. As well as helping more members gain the health, financial and social benefits of rejoining the workforce in a different role, this could also help overcome the psychological impact that can come with being classified as totally and permanently disabled.

A third approach is to give members more support to manage their claim benefit. One of the aims of the Quality of Advice Review recommendations is to enable financial service providers to provide simple personal advice, which could open the door for insurers and trustees to reshape the design of TPD products to incorporate a financial advice benefit.

At TAL, we firmly believe in the importance of TPD insurance, and the value and peace of mind it brings to those who need to claim. Over the coming months, we'll be working with our superannuation fund partners and the broader industry to unpack these issues and explore opportunities for improvement. By working together, we'll be able to help more members understand and value their TPD cover, and ensure they get the right support if they ever need to make a claim.