ABI Guide to Claims Based on Functional Assessment Tests

Introduction

The Functional Assessment Tests (FATs) definition of incapacity based on inability to carry out Activities of Daily Living (ADLs) or Activities of Daily Working (ADWs) have stricter criteria for claiming than for occupationally based definitions. Income protection or critical illness policies with this wording are usually issued to policy holders to provide a less expensive form of protection than is available under one of the occupationally based definitions of incapacity or to those for whom such cover would be unavailable. The exception is for long term care insurance, where some form of ADL test is usually obligatory.

In the case of critical illness insurance, claims involving FATs will always be based on “total and permanent disability”. FATs, when applicable, are used to establish whether or not the condition is totally disabling. Applicants additionally have to show that the disability is permanent. The meaning of “permanent” is set out in paragraph 3.12 of the CI Statement of Best Practice and is defined as “expected to last throughout the insured person’s life, irrespective of when the cover ends or the insured person retires”.

Why have we produced this guide?

Insurers are free to use any definition of disability that they wish and consumers are free to shop around for the definition that best meets their requirements. This guide is to help explain some of the criteria companies are likely to use when claims payouts are triggered by FATs, as opposed to occupational based definitions.

Who is it for?

The guide is in two parts.

Part One is for people

 Buying income protection, critical illness, or long term care cover (which is dependent on FATs) and want to understand what is covered (and not covered) in more detail  Claiming on one of these policies based on FATs  Advising on these polices for clients

Part Two is for

 Claims managers of companies adjudicating on a claim, although people making claims or advising clients on claims may also find it useful  Insurance product marketing branches

Using the guide

While we hope that this guide will be a useful reference tool, there are a number of factors that you need to take into account:  This guide is not intended to replace or enhance any specific insurance company’s policy terms, even when provided to you by the insurer  You must consider the actual definitions contained in your policy alone to determine the extent of your cover.

Therefore, please remember that if you make a claim based on FATs it will be assessed using the definitions contained in your policy construed in accordance with the applicable law.

Consultation

Comments are invited on this guidance and the attached guidance note. They should be sent to Richard Walsh, Head of Health, Association of British Insurers, 51 Gresham Street, London, EC2V 7HQ e-mail [email protected] by 31 December 2004 Part One – for consumers and financial advisers

What are Functional Assessment Tests?

Functional Assessment Tests are tests designed to measure a person’s physical ability to carry out a number of specified activities or tasks, perhaps after an accident or an illness. They are sometimes used by insurers to assess whether a person qualifies for insurance benefits linked to disability. Alternatively disability may be linked to a person’s ability to carry out an occupation. This guide does not cover occupationally based definitions. Guidance on these can be found in the ABI Statement of Best Practice on Income Protection Insurance. Functional Assessment Tests are also used by Social Services to determine is a person qualifies for State Incapacity benefit.

Insurers use various types of Functional Assessment Tests depending on the type of policy. The two main types are:

 Activities of Daily Living (ADLs). These are used to assess whether a person is capable of managing their personal care needs without someone else’s help, for example getting washed or dressed  Activities of Daily Work (ADWs). These are tests based on the sort of activities that people need to be able to do in a working environment, for example driving, using computers or machinery

How do I decide which policy will best suit my needs?

If you are thinking about taking a policy where claims are based on Functional Assessment Tests, you may find it helpful to consider the following five point checklist to compare the features of the policies you are considering:

The five point checklist:

1. Does the disability need to be permanent? Some benefits, for example Total Permanent Disability Benefit included in many critical illness policies, will only pay out if the disability is expected to last throughout your life. Other policies may pay out benefits during periods of temporary disability 2. What type of tests will be used? The type of test will be related to the type of policy under which a claim is made. An income protection policy will normally require Activities of Daily Work to be assessed whereas a long term care policy requires Activities of Daily Living to be assessed 3. How severe are the tests? For example: i. activities of Daily Living usually require you to be more disabled that Activities of Daily Work and are therefore normally harder to claim for ii. do the tests take account of assistive aids (like a walking stick) or adaptations (like a chair lift). If they do claiming will be more difficult because they take account of what you can do with the help of the aid or adaptation 4. How many activities does the policy require you to fail? Most policies require you to fail between 2 and 4 activities to make a successful claim. In general it is easier to claim if you are required to fail fewer activities 5. How many activities can be tested? Most policies offer between five and eight activities that can be tested. Generally the more activities available to be tested, the easier it is to make a successful claim

What if I need further advice?

If you need further advice on policy conditions based on Functional Assessment Tests you should take financial advice.

If you ever need to complain, for example over a refused claim, first write to your insurance company. If you’re not satisfied with their response, you can complain to:

Financial Ombudsman Service

South Quay Plaza

183 Marsh Wall

London

E14 9SR

Complaining to the Ombudsman won’t affect your legal rights. Part Two

Guidance note for insurers (or consumers and their advisers at claims stage) on Definitions of Incapacity – Functional Assessment Tests

Purpose

The definition of incapacity is a key factor in determining the validity of any claim. As such it will be examined by the discerning consumer to determine the product that will be purchased.

The Functional Assessment Tests (FATs) definition of incapacity based on inability to carry out Activities of Daily Living (ADLs) or Activities of Daily Working (ADWs) carries with it stricter criteria for claiming than for occupational based definitions. Policies with this wording are usually issued to policy holders to provide a less expensive form of protection than is available under one of the occupationally based definitions of incapacity or to those for whom such cover would be unavailable. The guidance that follows summarises current industry practice. At the end we have listed other approaches by other bodies, including Government. As would be expected, there are many similarities but there is no single agreed assessment process across all sectors.

Typical wording content

The level of incapacity for a successful claim will depend upon the functions covered by the policy, the number that need to be failed and the severity at which each trigger is set (eg walk 100 metres or 200 metres).

Insurers’ Obligations

The Financial Ombudsman Service has stated that, as with other definitions of incapacity, the insurer should make clear the principal characteristics of the definition of incapacity and the criteria on which it will be based.

The Ombudsman has expressed concern about this particular definition of incapacity as being capable of being misunderstood by the customer therefore the Key Features Document or Policy Summary, and any other relevant documentation, should give details of the ADWs/ADLs which apply to the policy and the number that need to be failed. This information should be repeated when a claim is made.

The FATs definition of incapacity may be offered to a customer who originally applied for another definition which the insurer, for underwriting reasons, is not prepared to offer. In such circumstances the customer will often have read a Key Features Document or Policy Summary describing another definition of incapacity. It is the insurer’s responsibility therefore to draft its counter-offer such that the restrictive nature of this wording is explained.

Guidelines

The following practices are recommended:

Unless the product says otherwise, each criterion should be looked at on its own merit and in isolation. No credit is given for partially satisfying a test.

The use of this wording must be interpreted and applied reasonably. Severely disabled people can often show tremendous resilience and motivation going to extraordinary lengths to continue as normal a lifestyle as possible, or to remain in employment. Therefore claimants who can only satisfy a particular criterion through extraordinary effort or perhaps whilst enduring considerable discomfort or pain may well, depending on the circumstances of the claim, be entitled to payment of benefit.

People who are virtually totally paralysed but who, perhaps, can type by using a specially designed typewriter that enables them to select the letter by use of their mouth, is such an example. It would be unreasonable to fail a criterion related to being able to type a letter under this definition in such circumstances. Please note this example does not specifically apply to long term care claims as typing ability is an ADW rather than an ADL.

In the case of long term care the same principles apply but they are likely to be additionally informed by an Independent Living Assessment carried out by an independent Occupational Therapist.

Mental impairment

Some policies include a wording on diagnosis of mental impairment, others do not. Whether or not diagnosis of mental impairment is covered by a separate condition, an inability to perform one of the functional criteria because of a mental, organic brain disease or brain injury impairment would still mean that that criterion would be satisfied unless explicitly excluded.

Long term care policies do not normally payout purely on diagnosis of mental impairment. A client will normally be considered as meeting the mental impairment criteria for long term care if:

 there is medical evidence of organic disease of the brain  they fail the standardised tests when measured against clinically published data  their intellectual ability means that they require continual supervision or assistance from another person to protect them or others “Good days and bad days”

Most policies state that a person must be “normally” or “usually” unable to carry out an ADL/ADW to satisfy the condition. This does not mean that the person will never be able to perform this function but a person will not qualify if they are unable to perform a test only on an occasional basis. Policy documents should make this clear and the medical or other supporting evidence obtained at the time of claim should establish the degree of regularity with which the function can be performed (e.g. to identify a multiple sclerosis sufferer who can walk the required distance but by so doing so becomes so fatigued that they are immobilised for the rest of the day).

Some long term care policies are more explicit, for example they may use the phrase “most occasions” and qualify this to mean “over 75% of the time”. In such circumstances account needs to be taken of those conditions where level of ability fluctuates, for example rheumatoid arthritis. In these cases companies should look at a client’s ability, over say a 3 month period as opposed to day to day or week to week. Providing the criteria has been met for at least 75% of the time period the criteria would be met.

Aids and adaptations

If the policy makes reference to “aids and adaptations” then the criteria should be assessed against the claimant's ability to perform them with reasonable aids and appliances, but it would be unreasonable to interpret this as including mechanical devices, for example:

 the ability to walk (XX metres)

o requiring the use of a walking stick, would mean that they would not satisfy the criterion o requiring the use of a wheelchair would satisfy the criterion

 Climbing stairs

o requiring the use of a hand rail would not satisfy the criterion o requiring the use of a stair lift would satisfy the criterion. In the case of long term care, providing the client was able and capable of using the stair lift without the need for physical assistance, they may not meet the criteria for monthly benefit. On the other hand they could meet the criteria for payment towards the stair lift through an Independent Living Fund component of the policy

 Bathing

o requiring the use of grab rails would not satisfy the criterion o requiring the use of a bath hoist would satisfy the criterion. In the case of long term care similar principles apply as for stair lifts ie it depends if the client is able to bathe unassisted by using a bath hoist or level access shower. Also, for bath hoists, it would depend on whether the client needed to be hoisted due to inability or whether they are being hoisted because it is the nursing/residential home’s policy. In the latter case the criteria would not be satisfied.

In identical circumstances if no reference were made to "aids and adaptations" the criteria would be considered against the person's ability to perform that function without the use of aids, for example

o a claimant who could not walk (XX metres) without using a walking stick would satisfy the criterion. In the case of long term care, account would also be taken of whether or not the client needed physical assistance – if not the criteria would not normally be satisfied although payment from an Independent Living Fund might still be applicable

Rising/sitting

Where a criterion includes rising/sitting from a chair the definition should state whether this will be judged on whether the claimant is able to do this from a chair which has arms or which has no arms.

Manual dexterity

As the use of the phrase “either hand” can be ambiguous, the definition should state whether inability to perform a function with “either” hand means that for the criterion to be satisfied, the task can neither be performed with the left nor the right hand.

Vision

The definition should state the print size or acuity score on which the criterion will be judged

External references

Insurers are not alone in assessing client’s ability to carry out functional assessment tests:

 the Department of Work and Pensions provides extensive guidance to doctors carrying out medical assessments for incapacity benefits see for example www.dwp.gov.uk/medical/ibh/medical-assesssment.pdf

 The Government and the Disability Rights Commission have produced a number of Codes of Practice, explaining legal rights and requirements under the Disability Discrimination Act 1995. These Codes are practical guidance - particularly for disabled people, employers, service providers and education institutions - rather than definitive statements of the law. However, courts and tribunals must take them into account. Part C of one of these (www.drc.org.uk/uploaded_files/documents/2008_229_guidance.do c) – “Guidance on matters to be taken into account in determining questions relating to the definition of disability” gives guidance on “the meaning of normal-day-to-day activities including o Mobility o Manual dexterity o Physical co-ordination o Continence o Ability to lift, carry or otherwise move everyday objects o Speech, hearing or eyesight o Memory or ability to concentrate, learn or understand o Perception of the risk of physical danger

 The Department of Health issues guidance on assessment processes for access to local authority care (www.doh.gov.uk under “fair access to care services”)  The British Society of Rehabilitation provides a comprehensive list of rehabilitation outcomes many of which relate to functional assessment tests (www.bsrm.co.uk/ClinicalGuidance/OutcomeMeasuresB3.pdf)

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