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Most working Australians pay for total and permanent disability (TPD) cover through their super, and most never chose it. The regulator found one version of that cover refused three claims in five, and it fell mostly on casual workers. One phone call tells you which version you hold.
Super funds add default life and TPD cover to many accounts and take the premiums out of the balance each month. Nobody sends a bill, so many people never learn they are paying.
The law now limits this. Cover stops on accounts with no contributions for 16 months, and new members under 25 or with a balance under $6,000 must ask for it. Everyone else in a default fund usually has it.
A TPD claim pays a lump sum if you can never work again. How the insurer decides that depends on a definition in the policy, and in 2019 the Australian Securities and Investments Commission (ASIC) found two very different kinds in use.
The second is not a work test at all. Someone who will never hold a job again, but can still dress and feed themselves, fails it.
ASIC reviewed TPD claims across nine insurers. Its findings:
| Finding | ASIC, Report 633 (2019) |
|---|---|
| Claims declined under the daily-living test | 60%, three in five |
| Claims declined under all other TPD tests | 12% |
| People covered by the daily-living test | nearly half a million |
| Who they mostly were | casual workers and people in high-risk jobs |
| Claims assessed this way | almost three a day |
| Claims withdrawn before a decision | about 12.5% |
The cover that refused most claims fell mostly on the workers least able to argue.
Partly. ASIC returned to the issue in 2021 and in 2023. By 2022 most of the 15 trustees it examined had changed or removed restrictive definitions. ASIC still told trustees to watch the outcomes of claims assessed under them, and to consider whether removing them, or funnelling fewer members into them, would serve members better.
So the test still exists in some policies. The only way to know about your own is to ask.
ASIC did not price the fix. Here is a rough sum from its own figures, with the assumptions shown so anyone can change them.
Halve or double the average payout and the answer moves in proportion. Spread across the millions of Australians who already hold TPD cover through super, it comes to a few dollars each a year.
The Netherlands shows a different design. When a worker falls ill, the employer keeps paying at least 70% of wages for up to 104 weeks, and both sides must work on a return to work. After two years, a government agency, the UWV, assesses how much earning capacity the person has lost. People fully and permanently unable to work get about 75% of their former wage; partial loss gets a partial benefit.
Two features matter. The body that decides is not the body that pays, and the benefit is an income scaled to the loss, not a single lump sum that is either paid in full or refused. There is no cliff to fight over.
The Productivity Commission's 2018 inquiry found that about 10 million accounts, a third of the total, were unintended duplicates, costing members $2.6 billion a year in extra fees and insurance. At least 1.6 million accounts sat in underperforming default products, which could erode nearly half a member's balance by retirement. It found duplicate insurance alone could cut a balance by more than $50,000. It put the gain from fixing duplicates and underperformers at $3.8 billion a year.
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