Jon-Paul Hale returns for part two of Disability Benefits

• Tweet

As I mentioned before, giving advice on two and five year disability benefit periods can be tricky, especially if you focus on short-term coverage.

Monday, April 20th 2026, 7:08PM

Rather than make comments on the original article, I’ll expand things here, as it’s important for everyone.

First, a few acknowledgments:

• Thank you to Paul Flood for your help after the last article. Your insights about pass backs were valuable and became a key point in my later discussion with Fidelity Life.
• Thanks to Fidelity Life for recognising the issues and coming to the party.

Fidelity Life has now addressed the rehab and retraining issues I raised.

Here’s how the conversation went:

* Can we have these?
* No.

* Ok, can you explain why we can’t have these?
* It’s Fidelity Life’s discretion, and we’re not providing them.
* Ahuh, so we’re doing it the hard way. (refer to the previous article)

Further to the complaint I raised, the answers above were not the company line; retraining and the reversal of those answers have been actioned by Fidelity Life.

Thank you; our mutual client has been overjoyed with the resulting engagement.

Now to the second bit, the start of the benefit payment period. Which got a few comments along the lines of: "That’s how it’s supposed to work”.

And I stated early on in the piece that “I’ve been caught on this hop with this too”. Sometimes I’m mistaken, but not often wrong. In this case, I didn’t have it right, but that, too, may have helped the client without my insurer having to respond.

To be clear, there was no opportunity for me to “fix” the coverage issues for the client before they were disabled, as they were disabled early in the advice process, before recommendations could be made.

Two main factors led Fidelity Life to change their approach:

1. Four and a half years ago, I outlined in writing what the plan was by withdrawing the disability claim and continuing the waiver claim.
2. Pass backs applied to the benefit changed the basis of the definition of date of disability to the original policy wording.

On the first point, since Fidelity Life didn’t correct the misunderstanding back then, our approach has some merit. It doesn’t fully change how the date of disability is set, but it does introduce an important consideration with pass backs.

Between the policy commencing and the date of disability, Fidelity Life added a clause stating that, in the situation of a retrospective claim, they could determine the date of disability from the date the client submitted the claim.

(The internal review team missed this detail when they reviewed my concerns about the payment term).

For many advisers, the ability to set a retroactive date can be a problem if a client should have claimed years ago. I had a case like this with Fidelity Life early in my career.

However, in this situation, we needed Fidelity Life to have the discretion to apply the income protection claim from the date it was resubmitted.

We expected a new wait period, which makes sense since we want this treated as a new but ongoing claim.

And reinforces the bit I put in writing, withdrawing the IP claim when the full ACC offset was to be applied.

(I don’t recall if I knew about the pass back clause at the time; it wasn’t in my notes. But likely was in the policy wording I was looking at four and a half years ago).

Now, I’m not saying I got this right from the outset, but there is a framework for navigating this that aligns with the original cover's intent.

As I said in my previous article, there is no expectation that a partial offset of ACC will change the duration clock. The fundamental point is that the 100% offset created by ACC raises a distinct value issue for the policyholder regarding unfair contract terms.

While Fidelity Life and the other insurers may be pricing in ACC offsets, pricing 100% offsets, paying $0 for short-term benefits, and calling that cover is unreasonable.

Clients buy cover to ensure that they have sufficient coverage if they face an issue, irrespective of the ACC response.

1. Either as a top-up to ACC because there is a shortfall.
2. Or a continuation of their own occupation cover when ACC runs out.

With age-65 and age-70 benefits, this issue doesn’t really apply. There’s no risk of the client losing coverage if ACC stops.

This experience highlights the value of a good adviser, who significantly improves clients' outcomes.

Advisers should get involved with their clients’ claims early. Here’s why:

1. Clients don’t understand this stuff, and they are relying on you to help.
2. Your solutions may have complexity that only you understand. Navigating claims to assist means that things are more likely to work as intended. Especially if your product knowledge is better than those looking at the case.
3. Advocacy on claims not only brings about better client outcomes, but it also sharpens up your advice skills to be a better adviser. There is nothing better for your learning than seeing your own advice in action and what has or has not worked as intended.

Here are the main takeaways:

• Don’t start by advising two or five-year benefit terms. Not advising on intended retirement age payment terms in the current environment exposes you to complaints and PI claims, particularly for long-term or permanent outcomes.
• Advice on short-term benefits needs to make clear that the payment term clock starts at the end of the wait period, regardless of the level of ACC offset. Unless you can negotiate with the insurer to delay the claim until the full 100% ACC offset ceases. And expect a wait period.
• If you have ACC Cover Plus Extra in the mix, you cannot have a reduced level of ACC CPX cover if there is a benefit period shorter than retirement age. You’re going to set them up to have a shortfall in a long-term claim, which could be an actionable complaint under the new rules. Not the ACC advice, but the lack of coverage for the full disability period with the reduced ACC CPX level.

Further to this, there is one additional wrinkle involving Asteron Life.

I have talked about this before, but it is pertinent to this discussion because it is not documented externally in Asteron Life’s adviser material.

If you have a to age 65 disability benefit before September 2023, you could not move this to a 2-year or 5-year benefit without having full underwriting applied.

Since September 2023, clients under age 55 can move to the Asteron Life two-year or five-year benefit without underwriting, but those over age 55 still undergo underwriting for the move.

This isn’t Asteron Life being difficult; this is a fundamental part of the product design.

Asteron Life’s two year and five year benefits default to age 70. This is why underwriting is triggered when moving from age-65 benefits to short-term payment terms.

• The contract term is being extended to age 70.

My comment for the insurers, please: for the sake of adviser sanity, make some changes to how these short-term products work. Remove some obvious sharp edges and consumer complaint points.

Asteron Life, please set disability cover payment terms to age 70 by default to avoid future issues for advisers.
For the rest, make the approach to a full 100% ACC offset more reasonable for non-mortgage-based covers.

• The client is paying for a benefit in addition to ACC, not because of ACC.
• Potentially make it a choice, where, in addition, there is a more expensive benefit with the option to choose concurrent for a premium reduction.
• This has some obvious advice challenges as clients may opt for only ACC in a small partial offset and conserve the full benefit for later. Policy wordings would need to address this.

For now, we have what we have, fraught as it may be. At the same time, there are many opportunities here in your client reviews. Significant value added for them when you actively address possible issues with clients’ disability solutions that they probably don’t understand.

Tags: Opinion

« Short-Term Disability Benefits

Comments from our readers

No comments yet

Sign In to add your comment

 

Printable version

Email to a friend