Most super funds pay out TPD claims
Study declares strong payout rates for disability claims.
New research has found most superannuation funds honour total and permanent disablement (TPD) insurance claims, either partially or completely, despite recent assertions of underinsurance.
A study by SuperRatings reveals nearly half of assessed super funds paid out between 71-90% of TPD claims in 2015/16. Around 30% of funds paid 91-100% of claims.
A little over 10% of claimants received 60% or less of their payout.
The average TPD declined claim rate is 16%, the highest among different types of cover, according to the Australian Securities & Investments Commission's (ASIC) most recent industry review.
Payouts for income protection claims were also robust, with almost half of assessed super funds granting customers 91-100% of claims in 2015/16.
SuperRatings data shows 3% of super funds' disablement claims paid out between 21-30%, while a further 3% maintained payout ratios of between 31-40%.
SuperRatings chief executive Adam Gee told the AFR this was a result of limitations on claims eligibility.
"We believe that the main reasons for this are very tight terms and conditions within their insurance policies, limiting the eligibility of members to claim, as well as an over-reliance on the insurer's decision, rather than any internal oversight of the claims process to question why a claim was denied," he said.
The majority of Aussies have TPD insurance but only one fifth have the level of cover they actually need.
A report by Rice Warner on underinsurance also found the median level of life cover held in super meets about 61% of basic needs for average households and almost half that (37%) for families with children.
Are you planning to pay for your life insurance through your super or just want to know how it works? Discover the advantages and disadvantages of purchasing life insurance through your superannuation.