Fresh thinking may lead to better outcomes for parents with seriously ill children.
The Superannuation Industry (Supervision) Act 1993 (SIS Act) outlines the specific scenarios that permit trustees to release benefits to a member. While these 'conditions of release' are comprehensive and relatively straightforward a simple change could bring relief to people experiencing unimaginable personal challenges.
AIA Australia (AIAA) (previously CommInsure) recently assessed the case of an insured person who was forced to cease work due to a diagnosed mental illness. Thankfully he was covered by income protection insurance and was therefore eligible for monthly benefits, which kicked in after the waiting period. The policy did exactly what it was designed to do. While this was an unremarkable claims assessment, AIAA contends that some fresh thinking on SIS Act conditions of release could empower us to do more for claimants in similar situations.
In the case study above, the claimant was diagnosed with adjustment disorder, a psychological response to an unusual stress, in this case triggered by the news that his young son was suffering from a life-threatening illness and would require ongoing, intensive treatment. Given the challenges that this family faced, it is no surprise that the claimant’s wife also submitted a claim for the same condition.
But what happens to a parent who goes through a similar experience with their child but doesn't immediately develop a condition such as adjustment disorder? Should this parent also be entitled to claim for their circumstances?
This parent is no stronger nor more resilient than the parent with adjustment disorder, and they are no less loving of their child. They are, however, faced with the difficult balancing act of financially and emotionally supporting their child through treatment while earning enough to continue sustaining their family. The evidence suggests that the combination of factors this parent faces can lead to a range of mental health disorders.
A 2013 study1 assessed the mental health of the parents of children with cancer. It concluded that "it may not only be the burden of caring for the child with cancer but also the associated financial difficulties that contribute to a higher likelihood of depressive symptoms in parents".
The study observed that, among the sample group, parents of children with cancer were more than five times as likely to report clinically relevant depressive symptoms as those parents with healthy children. They, in turn, were more likely to report depressive symptoms when also experiencing negative financial events.
Which brings me back to the SIS conditions of release. Under the Act, 'temporary incapacity' meets the conditions of release if a member has ceased to be gainfully employed as a result of either physical or mental ill-health, but is not severe enough to cause the member to be permanently incapacitated.
AIAA believes the regulator should extend the SIS conditions of release to include the physical or mental ill-health of a dependent child. Given the correlation between financial stress and caring for a dependent with a critical illness, this small but highly effective change would allow trustees and insurers to manage claims more proactively.
We're confident that this policy change would normally pass a trustees' materiality assessment. Thankfully, cancer among children is relatively rare and trustees would only need to pay benefits in extraordinary circumstances, where the parent has no option but to cease work for a period longer than the waiting period (typically no less than 30 days). In most cases, the increase in claims cost would be negligible and unlikely to trigger a premium increase.
Therefore, it comes down to whether the SIS conditions of release allow us to pay this kind of benefit.
Ultimately, income protection insurance provides financial support to an insured person when, because of an injury or illness, they are no longer capable of earning their usual income. Claimants can then focus on their treatment and rehabilitation, giving them the best chance of recovery.
Few would argue that providing benefits to a parent who has the burden of caring for a child with cancer is inconsistent with this intent.