Lawyers have been blamed for many of the problems currently impacting TPD insurance but the roundtable found they might be a symptom of more deeply-rooted problems. This is part six of a Super Review TPD roundtable.
Russell Mason, partner, Deloitte: Well if we're going to talk about inappropriate erosion of super, we should probably talk about the role of lawyers with TPD claims.
Geoff McRae, actuary, Rice Warner: And you might as well extend that to death claims as well.
RM: Well death claims as well, you're right Geoff.
Mike Taylor, managing editor, Super Review: So it comes back to you, John.
RM: What is the role of contingency fees? I see, regularly, large amounts of superannuation benefits eroded through contingency fees being charged by lawyers, and very, very uncomfortable with it.
Lawyers have a role. They can educate, I'm happy with that. If members need help in filling out claim forms on some sort of reasonable hourly rate, I haven't got a problem with that. But submitting a claim on behalf of a member for an illness or disability that TAL or any other group life insurer will pay in a flash and then taking 30 per cent-plus expenses is in my eyes unconscionable. And I've seen it, people with clear disease and it goes to, all of them, reputable group life insurers and you know the claim is going to be admitted, often waiving the six-month waiting period, the insurers bending over backwards and these people are losing a large chunk of their disability benefit through contingency fees.
Jocelyn Furlan, consultant: What's the responsibility of the superannuation industry to empower its members so that they don't feel they need assistance in it? In that fact scenario that you've given, I think there's some responsibility on super funds to say, "If you're not well, come to us first."
RM: Jocelyn, I've seen funds spend vast amounts of efforts, money. I see Angie's fund do it, I see most industry funds I've been, involved with, do it.
Educating members, it's a bit like on that basis if we educate people enough we wouldn't need compulsory super. Everybody would put in an adequate amount to save for retirement. They don't, so we've got a compulsory system and it largely works. So I think we need to have rules to say when a lawyer can get involved and to what extent. And I would have thought the first thing is it is compulsory to put in, and a lawyer can help, a claim with the fund at no contingency fee and see what happens then.
JF: I'd have to agree with you except that [with respect to] most funds you can't download a sample TPD claim form. There's no charter on the funds website about what you can expect if you need to make a disability claim.
I don't actually agree with you that funds do a lot. If I suddenly felt unwell I'd be incredibly vulnerable and incredibly traumatised, right. The last thing I want to do is talk to a call centre person before I have a chance to think about what's happening to me. I'd love superannuation funds to have a toolkit if you're not well with the sample claim form, admittedly you'd probably have to ring up to get the real one, that's okay. I can sit in the sanctity of what I call the "Surry Hills Centre of Excellence," otherwise known as my home, and actually work through what's going to be expected of me.
Where's the list on the fund's website about what kind of expectation is going to be in terms of my medical reports? How many, how old they're allowed to be, what sorts of things they should say? I think the industry could do a substantial amount more to empower, not educate because education in itself doesn't change behaviours, but when you look at the building blocks of changed behaviour, you want education, you want empowerment and you want engagement. I think funds really don't do that very well in this space in terms of information that I can easily find.
I go into super fund websites and the first thing I see is, "For employers click here, for members click there." I have never seen a charter about what I can expect if I make a disability claim that I don't have to remember my member number to claim. Why do super funds not produce claim forms when people ring up that are prepopulated with their information? Some Australians don't know the name of their fund, their membership number, all of those kinds of things. Why as an industry do we not then automatically send that out to them with all that stuff in it and just say, "You just have to sign"? There's a whole lot more we could be doing.
Angie Mastrippolito, chief executive, NESS Super: I totally agree Jocelyn but I don't think it solves the problem. I think it will go some way towards the problem but I don't know it solves it in a sense of that¨
JF: I don't say it solves it either but I'm just saying I think it's all the lawyers fault at this point.
GM: But funds are improving and it's not exactly what you describe but some of the best processes now that get the best feedback from members are when someone rings up that an informed person calls them back and they don't have to fill in the form, the person goes through the claim details with them and dependent on the insurer's requirements, either the recording is sufficient or they complete it and then send it out to them and get them to sign that it is a true record of what they've said.
RM: And I'm not saying people shouldn't seek legal advice and there are a lot of great lawyers out there who do good work to advise people of their entitlements that they would not otherwise be aware of. But when I buy a house, my solicitor doesn't charge me 20 per cent of the purchase price. There's a flat fee and I'd much rather it be structured so that their benefits aren't eroded substantially. It will cost them some money, I accept that, but I think under some sort of reasonable charging ratio.
JF: And I don't disagree with you but I don't think it's entirely plaintiff law firms' fault that lawyers are used to the extent they are.
MT: We're coming to the end of the thing so I'm going to give the right of reply here to the lawyer who has sat there looking anguished that...¨
JF: Sorry John
GM: He's been very lightly treated.
RM: Yeah, give him more.
John Berrill, lawyer: A couple of things. First of all contingency fees are banned in Australia, they don't exist.
I think what's been confused a little bit here is the "no win no charge" regime under which some lawyers advertise and do claims for people so, "You don't win, we don't charge you." You cannot charge someone a per centage of what they get, it's banned, that's American, that's not Australia, you can't do it. If someone is being charged that the first thing they should do is pick up the phone to the local law institute and complain.
Secondly, all legal fees are subject to, at least as from 1 July this year, nationally, a reasonableness of the fees for the work done test. Now that wasn't universal prior to this but it is now, so again, if someone's being charged on a $50,000 claim, they're being charged $20,000 for it to fill in some forms et cetera, that doesn't satisfy the sniff test so complain about it. There are remedies for people who do that.
Having said that, there is no doubt there are people out there who are, and I've heard stories of it too, who are being charged a motza for what appears to be doing very little. And there are certainly people who could do claims themselves and do do claims themselves or do it with assistance from non-lawyers et cetera and there is a trend to that. But as for whether a claim is easy or hard or whatever, there are all sorts of permutations and combinations on that. We're talking about it now, there's eligibility issues. The definitions are changing so what's the date a person last worked? Which insurance contractor are they caught by? Which definition of TPD are they caught by? Do they satisfy the at-work test or the activities of daily living test, whatever?
There are those sorts of issues, that's the definitional issue. There's questions of interest which is so not pursued in many cases and that is once a claim is completed if it's paid then are you entitled to interest under the Insurance Contracts Act. And then there's the claims processes which are becoming more and more complex, there's no doubt about it. There's things like daily living activity statements required, diaries being required for people to fill in, that sort of stuff. So the claims processes could be less complex than they are. There are some funds, Jocelyn, that are moving towards being much more user friendly and providing people with information like one of the big industry funds, for instance, if you make a claim that you don't fill in a form, they have a person ring you. Now I've got some potential problems with that but nevertheless, there are some funds that are getting better at that stuff and have been looking at that for the last five or so years.
In my view you cannot regulate whether someone can or can't go to a lawyer for it in the same way we can't regulate whether a fund uses an internal lawyer or Brett uses an internal lawyer or an external lawyer to assist with a claim. And there is a fundamental imbalance, power imbalance and information imbalance, between members and funds, in particular insurers. People, not necessarily lawyers, it's other people also, can fill that gap.
Some people feel the need to have lawyers do that, some people don't and there's a lot of competition in the marketplace that is now driving down prices. Is that driving down lawyer's fees? I don't know. But what I think this leads to is this industry is crying out for a code of practice, a practice that regulates how claims are done, by funds, by insurers, and by representatives of clients such as lawyers.
Now, I actually produced a draft code of practice and gave it to the key industry body ASFA last year and a couple of the other industry bodies and it's got nowhere. It's not been taken up, it's not been discussed or not been worked on, it was just a draft to workshop. The response of one of the key industry players was to write to all the law councils of each state and effectively say to them, not threaten them, but say to them, "Well if you're acting for people when they could be doing it themselves, well then there could be issues here in relation to what you're doing." I don't think that was the right approach and it hasn't resulted in any changes that I can see or any positive responses from the law councils of each state.
In my view a code of practice is what's needed here to drive better performance, to drive minimum standards, that you can have sort of a Heart Foundation tick so that if you subscribe to the code of practice, if it's a voluntary code, industry, lawyers, whatever, then that will hopefully drive improved performance and instead of getting what we see at the seminars you go to these days, and it's been going now for a couple of years, is there's a lot of angst, justifiable angst, about the role of lawyers and what they're doing but I don't see much really being done about it to try and improve it and I think something like this is very important.