Retirement
Why Insurance in super is ill-suited for mental health conditions
Members with a mental health condition might not be getting bang for their buck through their total and permanent disability insurance, new research has found.
Why Insurance in super is ill-suited for mental health conditions
Research released by Super Consumers in early July found that 30 of the 32 insurance policies (94 per cent) from Australia’s biggest superannuation funds contain restrictive definitions of TPD that apply the ‘activities of daily living’ ADL (or similar) test on the basis of work status.
Corporate regulator ASIC has found that claims assessed using an ADL test are 5 times more likely to be rejected. It also found that 77 per cent of mental health claims were rejected when an ADL test applied, compared with 15 per cent when the standard test applied.
To successfully claim on a policy that uses an ADL test, a person must show they can't do two basic physical activities such as speaking, walking, eating, dressing or using the bathroom.
“The practical impact is people with a mental health condition can’t claim on this insurance when they need it most. It’s clear these terms disadvantage people with mental health claims and are designed to protect insurer profits”, says Super Consumers Australia director Xavier O’Halloran.
Public Interest Advocacy Centre noted it has concerns that the insurance discriminates against people with a mental health condition.
"Excluding people from protection because they have a mental health condition is unacceptable,” senior solicitor Ellen Tilbury noted.
“We've seen insurers do it before by imposing overly broad mental health exclusions. The use of ADLs is another attempt to deny adequate cover to people with a mental health condition," Ms Tilbury says.
Clinical neuropsychologist Dr Jane Lonie says ADLs are “totally inappropriate” for measuring the occupational function of people with mental health conditions or injuries causing cognitive impairment.
"I am very concerned about the practice of using ADL tests to measure whether people with these conditions can hold down a job," says Dr Lonie.
The Financial Services Council has agreed to temporarily waive discriminatory terms until 1 January 2021 due to the global pandemic. Super Consumers maintain that ADLs should be ruled out for good.
“Insurers and funds have a duty to act in members’ best interests and to ensure that their services are fit for purpose. Making people pay full price for insurance they can’t claim on doesn’t meet that purpose, these terms should be removed altogether,” Mr O’Halloran concluded.
RELATED ARTICLES
About the author
About the author
Superannuation
Australia's super performance test transforms investing: What's the next move?
APRA’s latest performance test has done more than name and shame lagging super options; it has rewired investment strategy, compressed fees and accelerated consolidation across the $3Read more
Superannuation
Australia's super test dilemma reform could boost long-term gains while keeping accountability sharp
APRA’s latest performance test results have reignited a structural debate: can Australia hold funds to account while still backing the nation’s long-horizon investment needs? With the government ...Read more
Superannuation
Super funds rethink strategy as APRA's performance test hits a fork in the road
The latest performance test results have reignited debate over Australia’s superannuation benchmarking regime and prompted a formal government review. Behind the headlines, boards are quietly rewiring ...Read more
Superannuation
Aware Super enhances digital tools for financial advisers, boosting efficiency and client engagement
Aware Super has unveiled a suite of new digital features designed to streamline the workflow for financial advisers and their clients. This significant upgrade includes direct data feeds to Xplan and ...Read more
Superannuation
Super funds flip the script as APRA's performance test sparks strategic overhaul
Australia’s performance test has lifted the floor on retirement outcomes—and divided the industry in the process. After early shockwaves, failure rates have fallen and fees have trended down, but ...Read more
Superannuation
Rewiring Australia’s super performance test: from compliance brake to capital engine
Can an accountability tool double as a nation-building lever? Canberra’s review of the superannuation performance test aims to preserve member protection while freeing funds to back long-dated assets ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Australia's super performance test transforms investing: What's the next move?
APRA’s latest performance test has done more than name and shame lagging super options; it has rewired investment strategy, compressed fees and accelerated consolidation across the $3Read more
Superannuation
Australia's super test dilemma reform could boost long-term gains while keeping accountability sharp
APRA’s latest performance test results have reignited a structural debate: can Australia hold funds to account while still backing the nation’s long-horizon investment needs? With the government ...Read more
Superannuation
Super funds rethink strategy as APRA's performance test hits a fork in the road
The latest performance test results have reignited debate over Australia’s superannuation benchmarking regime and prompted a formal government review. Behind the headlines, boards are quietly rewiring ...Read more
Superannuation
Aware Super enhances digital tools for financial advisers, boosting efficiency and client engagement
Aware Super has unveiled a suite of new digital features designed to streamline the workflow for financial advisers and their clients. This significant upgrade includes direct data feeds to Xplan and ...Read more
Superannuation
Super funds flip the script as APRA's performance test sparks strategic overhaul
Australia’s performance test has lifted the floor on retirement outcomes—and divided the industry in the process. After early shockwaves, failure rates have fallen and fees have trended down, but ...Read more
Superannuation
Rewiring Australia’s super performance test: from compliance brake to capital engine
Can an accountability tool double as a nation-building lever? Canberra’s review of the superannuation performance test aims to preserve member protection while freeing funds to back long-dated assets ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
