Life insurers managing COVID risks in policyholders

The Financial Services Council (FSC) and FSC member life insurance companies have made a commitment ensuring frontline health workers are not blocked from obtaining life insurance because of the possible exposure to coronavirus. Insurers commit not to use exposure or potential exposure to the virus to decline an insurance application, charge higher premiums, or apply a pandemic risk exclusion to any offered benefits.

A frontline health worker means doctors, nurses, hospital staff, police, pharmacists, paramedics and aged-care workers.

For those who had life cover in place prior to 11 March 2020, when the pandemic was declared by the World Health Organisation, there is nothing preventing a death claim being paid out due to coronavirus so long as government travel advice was adhered to.

This agreement applies to new underwritten applications for individual life insurance benefits up to the financial limits for relevant healthcare workers. Underwriting processes and rules are still the same for those with underlying health conditions unrelated to COVID-19. Any applicant testing positive for COVID-19 or awaiting a test result will not be immediately eligible for cover.

The commitment starts on 6 April 2020 and will continue until at least 1 July 2020, where it may be extended.

Another initiative announced by the FSC ensures those who lose their jobs, are stood down or have reduced working hours due to the pandemic will not have their total and permanent disability (TPD) cover affected. Changes to cover that may otherwise be automatically triggered will not be imposed as it relates to coronavirus.

If a policyholder makes a TPD claim resulting from an illness or injury occurring since the crisis began, participating insurance companies will assess claims based on previous working status/arrangements at 11 March 2020 when the pandemic was announced by the WHO.

Generally, automatic changes to TPDI definitions occur after situations have changed for six or 12 months (for example across parental leave), but some can be triggered after three months. That means from 11 June 2020, some people could see their cover change by default under the usual arrangements. The initiative means insurers will step in before that occurs to ensure the continuation of full insurance.

The initiative is to run until 27 September 2020 alongside the current JobKeeper Payment scheme. Claims must be lodged before 1 January 2021.

Insurers are also helping customers in many other ways, including various implementations of premium waivers, holds, suspensions and holidays, hardship considerations, reinstatement without medical evidence, and participating in the initiatives set out by the FSC.