Life insurers have been reminded to give customers a chance to respond before cutting off their benefits.

“That is what procedural fairness requires,” the Australian Financial Complaints Authority says in a ruling against TAL.

An insurer that thinks there is a reason to stop paying income protection should not halt benefits while investigating, the authority adds.

TAL made payments on an income protection policy from May 2023 to February 2024, but in June last year it sent a procedural fairness letter to the claimant, which the ombudsman notes was many months after payments stopped.  

“The complainant is correct when she says that her payments were cut off without warning. That is unfair,” AFCA says.

The claimant argued payments should have continued until August last year, when she returned to work.

The ombudsman agrees and has ordered TAL to pay benefits up to July 28, pay a higher benefit based on profit and loss statements supplied, and pay interest on the unpaid months and underpayment.

TAL rejected the claim in July last year, saying the policy required the insured to have treatment recommended by her doctors, which she had failed to do.

The woman argued she had not refused treatment.

The ombudsman notes the policy required the insured to be under the regular care of and follow the advice of a medical practitioner, including recommended treatment and rehabilitation.

In February last year, a hand therapist recommended the woman have cortisone injections and get a surgical opinion, but she refused to follow that plan, choosing to continue with a more conservative option.

The ombudsman is not satisfied the complainant was “out of action” from February last year but says if the insurer had promptly put that to her, it might have been entitled to cut off her payments earlier.

Read the ruling here.