Life insurance is the most complex financial product that most consumers buy.
For starters, it's a misnomer – life insurance policies generally cover not just death, but total and permanent disability.
It's also hard to tell if a policy is any good until it's too late. A survey of more than 1000 people by finder.com.au found only one in five said they understood their life insurance policy.
Yet the allegations last week of dishonest behaviour at the Commonwealth Bank's insurance arm, CommInsure, are a good prompt for everyone to check their policies. "People are right to question whether their insurer is going to treat them fairly," says Andrew Weinmann, a practice group leader for insurance at lawyers Slater and Gordon.
"Long delays, unfair treatment and claims rejected on flimsy evidence are a problem throughout the life and disability insurance industry."
A Fairfax Media and Four Corners investigation last week found CommInsure policyholders with terminal illnesses had legitimate claims denied, including the insurance company using outdated medical definitions to deny claims.
CommInsure sells its insurance through financial planners, but it is also the provider for many industry, public sector and retail superannuation funds. An estimated 3 million people have CommInsure life insurance through their super funds.
Most consumers are covered by whichever insurance company their super fund appoints, with the contract put out to tender every few years.
"Most people don't read their policy documents and, if they're simply going for the cheapest or easiest cover, they may find that they're actually not covered for things that they assumed they would be," says Josh Callaghan, general manager, wealth, at Canstar.
So, what are the key points you should check for?
A good place to start is the "five dread diseases" and how tightly the policy defines them. Canstar has provided examples of the best and worst life insurance policy definitions of some of the relatively more common claims so that consumers can see how their policies stack up.
Definitions
"A common example is with total and permanent disability (TPD) insurance where some policies differ on whether they cover you for loss of your ability to do your 'own' or 'any' occupation," Callaghan says.
The best policy definitions will say that you will be covered by TPD if you cannot work in your own profession.
The worst is where you are able to continue to work in any job and in any capacity.
To be paid under terminal illness cover, some policies will pay the death benefit early if the policyholder has a life expectancy of less than one year. The better policies will pay if the policyholder has a life expectancy of less than two years.
Definitions of reasonably common medical conditions vary greatly, Callaghan says.
Multiple sclerosis
The best policies define multiple sclerosis as a diagnosis only.
The most restrictive definitions require a diagnosis and a 25 per cent permanent impairment of "whole person function".
Stroke
For stroke the best policies typically have definitions that are satisfied by a neurologist and evidenced by imaging.
The worst policies have definitions where stroke is confirmed by a neurologist, evidenced by imaging and there is a permanent 25 per cent loss of functional use.
Heart attack
With heart attack, a good policy definition is where the policyholder is considered to have had a heart attack based on one blood test and symptoms of heart attack.
A bad definition is one where there must be ECG changes and the blood tests meet specified thresholds.
Leukaemia
For leukaemia, the best definition is where early stage leukaemia is covered. The worst policies exclude stages 0, 1 and 2 of the RAI staging system used for chronic lymphocytic leukemia, which goes up to stage 4.
Skin cancer
The best definition for skin cancer are those where there is at least partial payments for relatively minor non-melanoma skin cancers, like squamous cell carcinoma, and full payment for any melanoma greater than or equal to 1 millimetre.
The worst policies are those where there is no payout for melanomas under 1.5 millimetres and where squamous cell carcinomas are excluded.
Dealing with problems
Those having problems with their life insurer should first talk to their super fund or adviser to understand the reasons for the knockback, says Ian Fryer, head of research at super fund researcher Chant West.
"If they are still are not satisfied they should make a complaint to the fund," he says.
However, policyholders should not assume their super fund is going to bat for them if a claim is knocked back by the insurer and leave it at that, says Weinmann.
If there is still no satisfaction after complaining to the fund, the complaint can be made at no cost to the Superannuation Complaints Tribunal.
However, it could be a long process when terminally ill policyholders do not have time on their side.
The latest quarterly statistics from the tribunal show that for all types of complaints taken to the tribunal it took more than 300 days, on average, for a claim to be conciliated. If the complaint went to determination it took about 700 days for a determination to be made.
The statistics also show that for the year to March 31, 2015, of the 53 disability complaints only six, or 11 per cent, were won by complainants. In the other 47 cases, the original decision of the insurer was confirmed.
Following the Fairfax/ABC investigation, CommInsure says it will establish a panel to review complex claims that have been declined.
Those with questions about their CommInsure policy can call 1800 106 133 or 13 10 56.
Sydney Morning Herald
