An insurer cannot reduce a policyholder’s payments for being unable to work by offsetting them with a disability pension unrelated to work capacity, the complaints authority has ruled.

The claimant had to stop work due to glaucoma and qualified for the disability support pension (DSP).

He also claimed under his group insurance with AIA, which accepted the claim but offset his DSP payments from the benefits it provided.

The man complained his benefits should not be offset because his DSP was not income-tested, not regarded as income or taxed, and his eligibility to receive it was unrelated to his capacity to work. He would be eligible for the pension if he remained employed.

AIA cited a policy clause that said its disability payment would be reduced by all benefits or other payments made in relation to the injury or sickness.

But when the Australian Financial Complaints Authority reviewed the policy, it found the insurer was required to show the DSP was paid because the man’s condition affected his ability to work.  

“There is nothing to indicate it is meant to extend to any type of benefit he receives solely due to the claimed condition itself.”

The insurer should refund all the offsets it applied, AFCA says.

But the authority has rejected the man’s claim for an increased tax bill and accountant fees, saying there is no proof he had an increased tax liability or incurred additional fees.

Read the determination here.