Retirement
ASIC slams ‘junk’ automatic super insurance
The design of total and permanent disability insurance and the claims handling process are not providing “real value” to the 12 million Australians automatically paying for this cover in their superannuation.
ASIC slams ‘junk’ automatic super insurance
The design of total and permanent disability insurance and the claims handling process are not providing “real value” to the 12 million Australians automatically paying for this cover in their superannuation.

The Australian Securities and Investments Commission (ASIC) has conducted a review which found “significant industry-wide problems” with total and permanent disability (TPD) insurance.
The corporate regulator considered that many consumers can’t rely on this cover when they need it most.
Most distressingly, the review found that nearly 500,000 Australians in casual roles or high-risk occupations are only covered by a very narrow TPD policy definition that would only provide a payout in the most catastrophic of circumstances, such as if they were unable to perform several “activities of daily living”.
Activities of daily living, also known as ADL cover, includes actions an individual undertakes on a daily basis, such as feeding, dressing or washing.

Under ADL cover, ASIC found that 60 per cent of such claims are declined, with this number five times higher than the average declined claim rate for all other TPD claims, which sits at 12 per cent.
Poor claims handling processes have also contributed to consumers withdrawing their claims.
One in eight claims lodged with insurers does not ever proceed to a decision.
ASIC also slammed the lack of key claims data held by insurers, which would otherwise “help them effectively manage the risk of consumer harm”.
Commenting on the findings, ASIC commissioner Sean Hughes said it was “alarming” that three TPD claims a day are assessed under the restrictive “activities of daily living” definition, which has a concerningly high decline rate.
“People that hold this type of automatic cover through superannuation are typically paying the same premium – for what is essentially junk insurance – as people who can access less restrictive definitions under general TPD cover.
“We also find it inexcusable that insurers did not use, or in some cases even collect, data to enable them to identify the very poor consumer outcomes that are being produced because of these restrictive definitions,” he continued.
He’s put the onus back on the industry, noting that superannuation trustees “have a crucial role to play in the delivery of life insurance to their members”.
“We expect trustees to act in their members’ best interests by providing access to affordable insurance products that are suitably designed for their members while also safeguarding superannuation balances from inappropriate erosion.”
The corporate regulator said it expects the industry to make “prompt changes to ensure this cover provides real value”.
A memorandum of understanding has recently been signed, which will see Australia’s major life insurance players working together to improve professionalism and community confidence in the industry.
AMP Life was recently called out for its “egregious” delays in paying out life insurance.
About the author

About the author


Superannuation
Rest appoints Marina Pasika as interim head of private markets
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Marina Pasika as the Interim Head of Private Markets. This decision comes as the fund embarks ...Read more

Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more

Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more

Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more

Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more

Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more

Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more

Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more

Superannuation
Rest appoints Marina Pasika as interim head of private markets
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Marina Pasika as the Interim Head of Private Markets. This decision comes as the fund embarks ...Read more

Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more

Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more

Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more

Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more

Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more

Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more

Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more