Need to know
- Greg Teagle worked as a mechanic in Broadbeach, Queensland, before he suffered a spinal injury that stopped him from working
- He claimed on the disability insurance he had through his super fund, AMP, but the claim was rejected due to an exemption for back injuries
- Super Consumers Australia says the disability insurance system doesn't protect people
"It was just a kick in the guts, you know?" Greg Teagle says of learning his superannuation fund had rejected his disability insurance claim.
"When you're diagnosed with something, and then you're on a video call with the lady working out how [severe] your disability is, it really starts to hit home…
"It's about what it does to your family, you know? And how your family thinks of you."
Claim rejected due to policy fine print
Like millions of Australians, Queenslander Greg Teagle paid for total and permanent disability insurance through his super.
He had joined AMP back in 2004 on the advice of an AMP financial adviser.
But when he suffered a spinal injury in 2020 and could no longer work as a mechanic, AMP rejected his claim because his policy excluded all back injuries.
These fine print terms can mean a policy won't pay a cent even when the person becomes injured or ill and can no longer earn a living
Super Consumers Australia director Xavier O'Halloran
Greg had previously had a minor back sprain in 2003, but this was unrelated to his eventual spinal injury.
"This exclusion came like a bombshell," Greg recalls.
Super Consumers Australia director Xavier O'Halloran says these exclusions can turn a policy into 'junk insurance'.
"These fine print terms can mean a policy won't pay a cent even when the person becomes injured or ill and can no longer earn a living," he says.
'Where's the duty of care?'
After suffering the spinal injury, Greg is now often hunched over in pain.
He had to sell his mechanic business in 2021, and found the forced transition to retirement extremely difficult. He has seen a psychologist to deal with the loss of self-worth involved in not being able to work anymore.
Being forced out of work was bad enough, but Greg says not getting anything from his insurance was a cruel blow.
He wonders why the super fund and insurer took his insurance premiums for so long without reviewing his cover to see whether it was suitable.
I just don't understand why they're creating such a problem for me when I paid every single month for 18, 19 years
He also found AMP slow to respond when he contacted them about his claim.
"They will never call you back. They won't ring. If you ring them and talk to them, you can't ever talk to the right person; it's awful."
"I just don't understand why they're creating such a problem for me when I paid every single month for 18, 19 years," he says.
"Wouldn't someone have said: 'Look mate, it's been 15 years since this bloke's had a review on his policy. Should we look at it?' Where's the duty of care?"
Insurer found to be at fault, but still haven't paid
After AMP rejected Greg's claim, he made a complaint to the Ombudsman, the Australian Financial Complaint Authority (AFCA).
In a huge win for Greg, AFCA ruled that Resolution Life (the insurer that had taken over AMP's life insurance business) had to pay him the money he was insured for.
AFCA found that the fund had failed to signpost that Greg was entitled to review his cover after three years. After a review, the fund would have removed the exclusion in line with underwriting guidelines.
Greg was dismayed to find that the insurer appealed AFCA's decision to the Federal Court
The failure to notify Greg and his adviser of his right to review his insurance was crucial. If the clause had been removed, his claim would've been successful.
Greg was dismayed, however, to find that the insurer appealed AFCA's decision to the Federal Court. Three years after suffering his career-ending injury, he's still fighting to get his money.
His lawyer has told him that most similar cases are settled before court, but he may not get anywhere near the full amount he was insured for.
Greg's adviser should never have sold him insurance that excluded back injuries.
Financial advisers recommended unsuitable cover
Generally, super funds automatically bundle disability insurance with super. In most cases, the fund offers this insurance without requiring a medical examination or tailoring the cover to exclude any pre-existing conditions.
Sometimes, however, a fund will conduct a medical exam if a financial adviser is helping the member apply for additional insurance cover. In Greg's case, he did a full medical exam with AMP and disclosed his previous back sprain.
After Greg's original financial adviser sold his business, other advisers took over. Greg had several meetings with these advisers over the years, but none of them flagged the potential problem that his insurance would be useless if he suffered a back injury and couldn't work.
None of them flagged the potential problem that his insurance would be useless if he suffered a back injury
Super Consumers Australia director Xavier O'Halloran says a particularly concerning aspect of Greg's story is that he purchased the policy through a financial adviser, rather than his super fund.
O'Halloran says Greg likely would have been better off staying with the default disability insurance in super that generally has no exclusions.
"Clearly, the adviser sold Greg insurance that was unsuitable for his needs. Greg was doing a physical job, but wasn't covered for back injuries that are common in this line of work."
Commissions cause conflicts of interest
Generally, in Australia, it's illegal for those giving advice about financial products to get a payment that could influence the advice they give. But there are some exemptions from this rule, including an exemption for sellers of life insurance.
The 2022–23 Quality of Advice Review recommended keeping this exemption for life insurance advice. Rather than tackling problematic commission schemes, the report suggested financial advisers who advise a person to buy a life insurance policy and get a commission from this sale should have to get their client's "informed consent" to receive this payment.
These conflicts ... have no place in the modern financial advice system and should be removed before they ruin more people's lives
Xavier O'Halloran, Super Consumers Australia
Consumer advocates including CHOICE have strongly opposed the ongoing practice of advisers receiving commissions for selling life insurance. CHOICE has argued that advisers having a financial incentive to sell certain products may mean they sell people products they don't need or that aren't a good fit for their clients.
"Greg's story is a stark reminder that these conflicts are like ticking time bombs," says O'Halloran. "They have no place in the modern financial advice system and should be removed before they ruin more people's lives."
Suitability for client is 'the bare minimum'
Independent financial adviser Andy Darroch says there is a fundamental problem with financial advisers suggesting people join a fund they're working with.
"It comes back to the old line, which summarises almost every problem we have in this industry: 'Show me the incentive, and I'll show you the outcome'. It's a massive problem if you've got someone selling you insurance, and they're under the banner of the product provider."
There is a fundamental problem with financial advisers suggesting people join a fund they're working with
"Especially when some policies pay adviser commissions, it would be delusional to say that there are no conflicts of interest in such situations [or that they] don't adversely impact consumers. The findings from the royal commission left absolutely no argument against this."
Darroch says the adviser should have thoroughly investigated whether the insurance in Greg's new fund, which had the exclusion for all back injuries, suited his needs.
"For someone who is a mechanic who would be liable for back-related issues, I would think twice before moving them … doing so is not best practice; it's the bare minimum."
Members should not be left to review their own insurance
In Greg's case, he says that after AMP rejected his claim, they told him it was his responsibility to review his insurance cover and ensure it was suitable, despite being sold the insurance by an AMP-backed financial adviser.
But O'Halloran says the onus shouldn't be on ordinary Australians to decipher their insurance contracts.
Many of these contracts contain complex legal and medical terms and can be hard work for even experienced lawyers working in the field to understand.
It's not good enough for insurers and funds to leave it up to people to untangle dense contracts and monitor them for changes
Super Consumers Australia director Xavier O'Halloran
Besides, O'Halloran says, Greg placed his trust in an expert, so it was fair to expect someone with this expertise to act in his best interests.
Research conducted by CHOICE in 2022 found many Australians aren't aware of what insurance they have through their super. Only 54% of respondents knew how much they paid for insurance, and just 51% knew what situations their super insurance covered.
Further, insurance contracts can change over time, so cover that was suitable when a person joins a fund may only be suitable for some of their career.
Insurance contracts can change over time, so cover that was suitable when a person joins a fund may only be suitable for some of their career
"It's not good enough for insurers and funds to leave it up to people to untangle dense contracts and monitor them for changes," says O'Halloran.
"We are very sympathetic to any customer who is enduring challenging life circumstances that necessitate making a claim on their Total and Permanent Disability policy," Resolution Life Australasia said in a statement to Super Consumers Australia.
"We take our obligations to customers very seriously. At all times, Resolution Life Australasia assesses claims against the applicable policy terms and conditions, taking into account the medical advice, and in line with the industry and regulatory frameworks."
AMP told Super Consumers Australia they were sympathetic to Greg's circumstance but couldn't comment any further as the matter is still before the courts.
Insurance failing many Australians
In 2019, ASIC produced a report titled 'Holes in the Safety Net', outlining how this type of insurance doesn't provide good value cover to all Australians.
A follow-up report in 2023 found that some super funds and insurers had improved their insurance, but there is still a long way to go to address gaps in the system.
Super Consumers Australia has been campaigning for a better solution for people forced out of work. We've previously covered the stories of people who became disabled but had their insurance claims denied because of restrictive terms. These terms make it harder to claim if you're working casually or in a job deemed dangerous by the insurer.
Policy exclusions continue to leave Australian without cover when they are injured and unable to work.
Some insurance policies also make it harder to claim when a person is a carer, not working full-time, is an older Australian or is making a mental-health related claim.
"We're continuing to see people like Greg, who have been paying for this insurance for decades, left in financial distress when their insurer rejects their claim," says O'Halloran.
"Too many Australians are being left vulnerable by fine print exclusions in their insurance cover.
"We need a system that meets community expectations and provides financial support for anyone who becomes disabled and is forced out of work."
A review of insurance in super is overdue
When the Productivity Commission did a deep dive into super in 2018, it acknowledged the many gaps in the super insurance safety net. It recommended the government set up an independent inquiry to assess whether insurance should be funded through super at all. Five years later, this still hasn't happened.
For Greg's part, he hopes nobody else has to go through the distress he's experienced.
"It's not something I would wish on anybody," he says. "I don't even know how to explain it, mate. I'm a little bit numb from it all to be honest."
Readers seeking support with mental health can contact Beyond Blue on 1300 224 636 or at beyondblue.org.au
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This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.
Stock images: Getty, unless otherwise stated.
