Several advisers have been writing to me over the last few months with issues with TPD benefits. I have also conducted a review of TPD benefits recently for a client. Several aspects of TPD design have come into focus through the process. Two that stand out are variations in loss of independent living features, which are usually based on activities of daily living (ADLs).
Almost all companies have five activities. At first glance these appear very similar. Closer inspection shows differences. The first is that the walking definition of some is not fulfilled if the insured person can get about in a wheelchair, whereas with others it is fulfilled if the insured has to use a wheelchair. The second difference is that independent existence requires the assistance of a person to help the insured, which is not fulfilled if technology can help.
Although I have not done the research, I am willing to bet that consumers believe that if you are confined to a wheelchair that would indicate a claims payment would be made. In fact, to be fair, it probably does pay out most of the time: as in most cases the claim would qualify under other factors. But claims do exist where the decision will hinge on this one fact - and I think consumers would expect the cover to consider you sufficiently disabled if you needed a wheelchair to get about (assuming the other conditions were met, of course, such as this being permanent - not merely temporary). In fact I saw the details of one such claim yesterday. Likewise with technology: the rapidly improving situation with technology means that someone who could not walk at all may be able to buy a set of robotic legs that enable them to walk. Here are examples: on in the US, another using technology developed here in New Zealand.
Individually these are interesting issues - and should be resolved - but collectively they indicate both a communication and product development challenge. The communication issue is how we get across to customers what we mean by loss of independent existence. We cannot simply allow a situation to exist where we allow our different perceptions of what is meant to exist. At best, that's simply too sloppy, at worst, if it is done knowingly, then its a form of misrepresentation of what the product does. The product development challenge is to work out what consumers need and deliver a product that does that. Robot legs do not come cheap - I suspect that consumers want a policy that will pay for them, not fail to pay out because of them. In product design that means some hard work has to be done. That means literally testing scenarios and descriptions and working out what level of cover is needed, how to communicate about that cover, and building the wording and pricing up from there. Then launching that and successfully demonstrating how much better that product is compared to the rest. There is definitely room for improvement.