This is another instance when we should question how far does insurance really protect us and provide for our dependents?
To be sure, everyone needs insurance, especially those with dependents. But for cases involving Total and Permanent Disability (TPD), it is not so clear that our current insurance policies really offer the kind of protection we need.
Take the case of stroke victim Chiang Soong Chee mentioned in the ST article quoted below.
Mr Chiang was certified with TPD in 2001 when he came down with a stroke. He had received a total of $60,000 in compensation (in instalments) out of a total sum assured of $150,000 when the insurer NTUC Income decided to stop further payments in 2005 as his condition had improved to the point where he could find work, never mind that work was not the same kind of work as he was used to doing before.
When a person has come down with TPD, you can be sure he is no longer insurable, meaning he no longer qualifies to purchase additional insurance policies. This means Mr Chang is now uninsured against further illness or disability which may affect his livelihood in the future.
Since his total insurance payout was only $60,000, Mr Chiang received only 2/5 of the total sum assured. If he felt that the original $150,000 sum assured was adequate for his needs when he purchased the policy, Mr Chiang may well find that the total payout fell far short of the compensation he required in the event of illness or disability.
In cases like Mr Chiang’s, the insured may take a huge pay cut as a result of not being able to perform at the same job as he did before. Is it then fair to cancel his remaining compensation simply because he or she is still able to work, regardless of the kind of work involved?
The practice of paying TPD compensation by instalments has allowed insurers to make only partial payments when it is later found the insured has regained the ability to hold some kind of employment, even if the nature of the employment is far below what was held previously. This means many people like Mr Chiang will be effectively shortchanged, as they had paid the premiums based on the full sum assured.
It is time to ask hard questions whether insurance as it is currently structured really provides adequate financial protection to Singaporeans.
Dec 27, 2007
No full policy payout to disabled man who got job
High Court draws distinction with policy-holders who are totally, permanently disabled
By K.C. Vijayan, Law Correspondent
TPD or not TPD – that was the question before a High Court judge. TPD is ‘Total and Permanent Disability’, and a standard clause in life insurance policies here.
But how it is understood and applied came up before Justice Woo Bih Li in an appeal pursued by insurers NTUC Income.
In a judgment published yesterday, he overturned a lower court decision which held that stroke victim Chiang Soong Chee was entitled to a full policy payout.
In doing so, Justice Woo drew a distinction between policyholders who become disabled but are able to find work later and those who are permanently disabled.
Mr Chiang’s life policy provided for a full payout if he was unable to do any work or be a wage earner. His sum assured was $150,000.
In July, a district judge had ruled in favour of Mr Chiang, 53, holding that he was entitled to the full payout, since his stroke prevented him from doing the work that he did prior to the injury.
But Justice Woo ruled that such a broad interpretation would mean, for example, that a surgeon will get a full disability payout if his dominant hand were to shake slightly so that he can no longer serve as a surgeon, ‘even if he could have an equally lucrative career as a banker’.
Premiums would go up if this was allowed, among other things, Justice Woo said.
Mr Chiang’s stroke in March 1992 paralysed his left limbs. In August 2001, he was certified as permanently disabled by two doctors and NTUC Income agreed to pay him four instalments of $15,000 each.
But in September 2005, before the balance of $90,000 was due, the insurers asked his doctor, Dr Tong Hoo Ing, to check his current condition.
Dr Tong certified that while Mr Chiang was not totally and permanently disabled, he was unemployable because he still carried a limp and had poor short-term memory.
But NTUC Income decided not to pay him the remaining $90,000, holding he was no longer totally and permanently disabled.
Mr Chiang then sued. A partner in a family-run firm, Sai Sia Paint, he was paid an average $6,000 a month, supposedly as post-disability allowance by his siblings.
But Justice Woo found that Mr Chiang’s work involved certain responsibilities and that Mr Chiang had not established that ‘he was unemployable in the strict sense’.
NTUC Income, arguing its appeal through lawyers N. Sreenivasan and P. Sundararaj, yesterday said the ruling restored common interpretation, understanding and application in relation to what is meant by TPD.
NTUC Income’s chief executive Tan Suee Chieh said the insurers were ‘pleased with the decision’, stressing the issue was one of principle. NTUC Income was thus not asking for costs. The insurer paid out more than 500 TPD claims this year, amounting to more than $20 million.
Justice Woo called for insurers to educate clients on the limited scope of disability benefits in their policies.
Life Insurance Association Singapore president Mark O’Dell said yesterday that the industry had over the last decade launched initiatives, from providing consumer guidelines and literature to enhancing guidance given by financial advisers.
Contacted yesterday, lawyer Yeh Jin Sien said his client, Mr Chiang, will be discussing the judgment together with lead counsel Cheong Yuen Hee. The issue of costs awarded in the lower court will also have to be decided.