Major super funds still clinging to junk insurance

stressed woman holding mobile phone

Super Consumers Australia is today calling on funds like NGS, Prime Super and Spirit Super to dump junk insurance terms that are putting Australians at risk. 

The call comes after a sustained campaign over the last two years that has seen over half the market remove or dramatically reduce the impact of this junk insurance. The remaining funds have held onto policy terms which discriminate against people who are older, unemployed, working limited hours or in hazardous occupations.

This is a media release from Super Consumers Australia. It was originally published on 28th October, 2021.

“Despite recent improvements in the sector, a worryingly high number of funds have chosen to sit on their hands and do nothing. This leaves people being charged for insurance policies they will find next to impossible to claim on,” says Xavier O’Halloran, director of Super Consumers Australia. 

The consumer advocate opposes the use of tests known as ‘activities of daily living’ (ADL) tests to assess people’s ability to work, as they only identify severe physical incapacity. The regulator ASIC found that the tests are difficult to pass and result in insurance that does not meet members’ needs.

“The insidious nature of these restrictive disability tests means that people already in a precarious financial situation have inadequate cover if they can never work again. Equally unfair is they make it much harder to claim for mental health conditions. Super funds that are clinging on to these terms need to follow the lead of their peers and financially protect people  regardless of whether they are impacted by a mental or physical disability,” says Mr O’Halloran. 

Over the past 16 months Super Consumers Australia has been corresponding with funds with some of the most restrictive insurance policies on the market, calling on them to dump restrictive tests. A number of funds have failed to remove or significantly reduce the impact of these terms:

  • NGS Super, 
  • AMP
  • Telstra Super,
  • Prime Super and
  • Spirit Super. 

Each of these funds continue to apply junk terms to people once they are unemployed for six months. The only exception is NGS, which applies the terms to those unemployed for just three months. 

Encouragingly, eight of the funds we wrote to have dumped or will dump their junk insurance terms and an additional six have significantly reduced the impact. 

“It’s positive to see that most of the funds we wrote to have either removed the terms or are well on their way to reducing the impact of the terms. They’re sending a clear message to the rest of the industry that these terms are out of date and put people at risk financially.”

Super Consumers Australia has identified a further nine major funds with restrictive insurance that were not part of the initial letter campaign. All but one have yet to improve their policies. 

“Those super funds should take this as a warning. They are falling behind their peers and denying people access to fair insurance,” says Mr O’Halloran. 

For more information on restrictive TPD insurance you can read ASIC’s latest report, and Super Consumers Australia’s article and research blog post.

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