ASIC's review of disability insurance claim data provides conclusive evidence insurers have created 'junk superannuation insurance' policies that many members are unable to claim on.
"Where people were subject to restrictive 'junk' terms, 60% of claims were knocked back, compared to just 12% when these terms are not applied," says Super Consumers Director Xavier O'Halloran.
"Junk insurance is a problem highlighted by both the Hayne Royal Commission and Productivity Commission, and it's time for parliament to take urgent action to ensure that people have a quality safety net when they can't work due to disability."
"Commissioner Hayne hit on the right solution, we need universal life insurance terms for default insurance through superannuation."
Of particular concern is the rising use of 'Activities of Daily Living' (ADL) clauses, which result in people who are unable to work - but who can still walk, go to the toilet, and feed, cloth, or bath themselves - being denied insurance.
"Insurers have taken a magic pudding approach to their policies, stripping out quality to give the appearance of affordability," says Mr O'Halloran
"The report is titled 'Holes in the safety net', but people need to understand that it's the insurers who are cutting these holes."
"In most cases people are paying the same premiums but are being denied cover due to a term hidden in the small print of the policy".
"In many cases this is cover people haven't chosen or may not know they are paying for, so we need to make sure it is an adequate protection".
"After paying for insurance for many years, you should be able to rely on your fund to support you if you can't work".
"The life insurance sector is putting profit over people, leaving Australians out of pocket and under-covered".
ASIC have conducted multiple inquiries into the practices of the insurance sector over the past five years, and Treasury has conducted the review of unfair contract terms recommended by the Hayne Royal Commission.
"The superannuation and insurance sectors completely failed in their self-regulatory solution through the Insurance in Superannuation Voluntary Code of Practice," says Mr. O'Halloran
"The Code is unenforceable and does not protect people from these junk terms."