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Trauma insurance, also known as critical illness insurance, is designed to provide financial support to individuals diagnosed with severe medical conditions such as cancer, heart attack, or stroke. Despite the high prevalence of such conditions, a 2011 study found that 7 out of 10 Australians knowing someone who has suffered a trauma, surprisingly few Australians have trauma cover or make claims. This discrepancy raises important questions about awareness, affordability, and trust in insurance products.

High incidence, low coverage

Australia’s high incidence of trauma is well-documented. Severe medical conditions affect a significant portion of the population, impacting not only the individuals diagnosed but also their families and friends. Given these statistics, one might expect trauma insurance to be a widely adopted safety net. However, various factors contribute to the low uptake of trauma insurance.

Lack of awareness and understanding

One primary reason for the low coverage rates is a lack of awareness and understanding of trauma insurance. Many Australians are not fully informed about the existence and benefits of trauma cover. Even those who are aware may not understand how it differs from other forms of insurance, such as life insurance or income protection insurance. This lack of clarity can lead to misconceptions about the necessity and value of trauma insurance.

Affordability concerns

Another significant barrier is the perceived and actual cost of trauma insurance. Premiums for trauma cover can be relatively high, especially for comprehensive policies. For many Australians, particularly those with limited disposable income, the cost can be prohibitive. Additionally, individuals may prioritise other financial commitments over insurance, viewing it as an unnecessary expense rather than a crucial safety net. There are limited tax incentives and cover cannot be held within Group Life Super.

Complexity and confusion

The complexity of trauma insurance policies can also deter potential policyholders. Policies often come with a myriad of terms and conditions, exclusions, and definitions that can be difficult to understand. The technical language and the fine print can be overwhelming, leading individuals to avoid purchasing coverage due to confusion or fear of making an uninformed decision. Policies tend to straddle the tension between covering for a claimed condition and narrowly defining eligibility criteria, which can leave individuals uncertain about whether they would actually qualify for a benefit.

Mistrust in insurance providers

Mistrust in the insurance industry further exacerbates the issue. High-profile cases of denied claims and disputes have damaged the reputation of insurers. Consumers may worry that insurers will find loopholes to avoid paying out claims, reducing their confidence in the value and reliability of trauma insurance. This mistrust can deter people from investing in coverage, fearing they might not receive the benefits when needed.

Regulatory and market challenges

Regulatory and market challenges also play a role. The Financial Services Royal Commission highlighted instances of mis-selling and misconduct within the insurance industry, as well as the quality of the product offering which have contributed to consumer concerns. Additionally, the regulatory environment can impact the availability and design of trauma insurance products, influencing consumer access and choices.

What does it mean for policy holders of trauma cover?

1. Read and understand your policy & claimed condition: Before making a trauma insurance claim, carefully review your policy document to understand the coverage, exclusions, waiting periods, and claim procedures. Knowing what is covered and what isn’t, will help you navigate the claims process more effectively.

2. The severity of your claimed condition should be defined: For example, a cancer diagnosis may or may not entitle you to claim. You will need to check Policy terms which will explain what type of cancer, its location and severity of condition is eligible. Partial benefits may be paid for lower grade tumour.
3. Obtain legal advice about your cover + policy terms: Ask whether the particular circumstances you have suffered will be covered under Policy terms. Conditions and exclusions can be technical. Make sure you understand the issues which will be assessed in your claim before you lodge your claim.

At Carroll & O’Dea Lawyers, we know how much your trauma claim matters, to you and your family. Your financial security can depend on it, and we are here to guide you through the process, helping you put forward the strongest claim possible.

Talk to us

We are able to offer initial advice in relation to your Trauma cover if you have recently suffered a critical illness such as cancer, heart attack, or stroke. We offer a first appointment free, with no obligation, to review your claim and explain your options. We also work on a no win, no fee basis for trauma and TPD claims.

This article was published on 28 May by Carroll & O’Dea Lawyers and is based on the relevant state of the law (legislation, regulations and case law) at that date for the jurisdiction in which it is published. Please note this article does not constitute legal or financial advice. If you ever need legal advice or want to discuss a legal problem, please contact us to see if we can help. You can reach us on 1800 059 278 or via the Contact us page on our website. (www.codea.com.au). If you think you or a family member might be eligible to make a claim, use our Trauma Insurance Claim Check now.