COVID job losses leading to people paying for junk insurance

Super Consumers Australia urges insurers to drop discriminatory policies that don’t protect the unemployed or people working limited hours.

Super Consumers Australia has warned that the insurance industry will put approximately 343,000 people at financial risk if it doesn’t take action by the end of September.

The warning comes after the Financial Services Council promised to temporarily waive discriminatory terms in default disability (TPD) insurance policies sold through superannuation. Insurers are intending to re-introduce discriminatory terms which target the unemployed and underemployed when the Federal Government’s Jobkeeper Payment Scheme is slated to end in September.

“The insurance industry has created a perfect storm, with many people facing job uncertainty potentially paying for junk insurance. The practical impact is that people covered by these policies will face a test with a 60% fail rate. The tests target anyone who is unemployed or working limited hours after September,” says Super Consumers Australia director Xavier O’Halloran.

“People will be falling off a financial cliff in September if discriminatory terms remain in place. We are calling on insurers to permanently waive these harmful terms once and for all,” says Mr O’Halloran.

Typically these policies cost the same regardless of the quality of cover. This will see some people who are unemployed or working limited hours pay full price for cover they are five times less likely to successfully claim upon.

“Charging full price for junk cover is indefensible. It is time to make the insurance we pay for with our super savings good value by requiring all superannuation funds to issue default insurance with fair, universal terms that meet the needs of all Australians,” says Mr. O’Halloran.

New research by Super Consumers confirms that almost all insurers apply a different definition of total and permanent disability to claims by people who are unemployed, work less than a specified number of hours per week or work in a dangerous occupation.

Corporate regulator ASIC has found that people hit with discriminatory terms are 5 times more likely to have their disability claim rejected.
Research by Super Consumers has found that 30 of the 32 insurance policies (94%) from Australia’s biggest superannuation funds apply restrictive definitions on the basis of work status. Super Consumers found that:

  • 94% of insurance policies from major super funds make it difficult for people to claim on their insurance if they are unemployed.
  • 47% of insurance policies from major super funds make it difficult for people who work less than full-time hours to claim on their insurance.
  • 16% of insurance policies from major super funds make it difficult for people working jobs they classify as high risk to claim on their insurance. High risk jobs can include long-haul truck drivers, airline crew, labourers, and factory workers.

“The unemployment rate is forecast to increase to at least 8% and not return to pre-pandemic levels until mid-2022.4 Yet the insurance industry is going to start discriminating against people who are unemployed or working limited hours from September 2020,” says Mr. O’Halloran.
“Discriminatory terms put people experiencing financial hardship due to the pandemic most at risk of paying for insurance they’ll never be able to claim on,” says Mr. O’Halloran.


Total and Permanent Disability (TPD) insurance provides financial support to those who can never work again due to disability. While policies vary, most consider a person eligible for a payout if they become disabled and are unlikely to return to work in any occupation for which they are suitably qualified.

However under many default policies, people who don’t meet certain criteria must pass an Activities of Daily Living (ADL) or Activities of Daily Work (ADW) test.

These restrictive tests require a person to show they cannot perform basic physical tasks such as bathing and feeding, are extremely difficult to pass. In 2019, corporate regulator ASIC found that people subjected to restrictive tests were 5 times more likely to have their claim rejected.

Research by Super Consumers confirms that people who are unemployed or work less than a minimum number of weekly hours are most likely to be subjected to restrictive tests. With unemployment and underemployment surging due to the global COVID-19 pandemic, many more people are likely to fall into this category, limiting their ability to make a successful insurance claim.

Super Consumers Australia Media Release 09/07/2020

Media Contact: Eleanor Barz – Super Consumers Australia 0404 371 805