Millions of Australians pay for total and permanent disability (TPD) insurance through their super fund. This insurance is generally automatically included when you join a super fund and the premiums are taken out of your super.

The insurance is designed to provide financial support if you ever become ill or injured and can no longer work. And while it can be a lifesaver, delays in processing claims have long been a problem.

If someone has a complaint about their super fund or insurer that isn't resoved to their satisfaction, they can progress their complaint to AFCA. 

In the 2022–23 financial year, super-related complaints to AFCA were up 32% overall, but alarmingly, there was a 136% rise in complaints about claim delays, including the payment of death benefits.

How delays happen

Melissa O'Neill, special counsel at Shine Lawyers, says her firm has "absolutely" seen more claims processing delays.

O'Neill says that at one point she had to send 17 emails over a three-month period to get a response from a fund about a claimant's entitlements. She also says phone queues to talk to claims assessors can go on for hours, meaning you have to contact them by email. 

O'Neill had to send 17 emails over a three-month period to get a response from a fund about a claimant's entitlements 

She has also heard of claimants being wrongly advised that all they need to lodge their claim is the claim form and a certificate from their GP, "then being subjected to a plethora of onerous requests for more and more medical and financial information in piecemeal fashion".

While the AFCA numbers paint a picture of increasing delays, O'Neill notes that these complaints may not capture the extent of the problem. She says many people wouldn't contact AFCA about their delayed claims, meaning the number of delays "may be significantly higher". 

Delay can adds to the distress of those making claims

When a person loses the ability to work and claims on this disability insurance, they're already in a vulnerable position.

We've previously highlighted how lawyers working in the field say some funds and insurers routinely delay and drag out claims. These long processing times can cause claimants unnecessary distress, financial hardship and even relationship breakdowns.

We've also told the story of "Carol", a domestic violence victim-survivor who faced unreasonable delays from her fund when she made a disability claim.

'Marriages end. People lose their homes.'

Craig Parrish, principal lawyer and state litigation leader of superannuation and insurance at Maurice Blackburn, says that in his experience, people don't lodge disability insurance claims lightly.

Parrish says that people making claims are already "stressed and vulnerable", but delay can worsen their situation. 

"As the life insurers highlight in their advertising, when an insurance claim is paid promptly, it can ease some of the financial burden on our clients and their families, and they can focus on their recovery," he says.

"Regrettably, what we more often see is unreasonable, unexplained and lengthy delays in claims assessment, which impose additional pressures on our clients' mental health and their relationships, further strains their finances, and hinders their recovery and ability to plan for the future."

When an insurance claim is paid promptly, it can ease some of the financial burden on our clients and their families, and they can focus on their recovery

Lawyer Craig Parrish, Maurice Blackburn

O'Neill says this practice "has an enormous adverse impact on the health of claimants" who are already ill or injured and have lost their income.

"The worry and distress about being unable to feed and clothe your family, pay the bills and keep the mortgage payments up will, in many cases, lead claimants to experience mental health issues that may not have presented if delays in assessment and payment had not occurred."

"Marriages end. People lose their homes. Social isolation ensues. Suicide is, sadly, not uncommon."

What's causing the delay?

O'Neill says her firm has been hearing that claims assessors are under-resourced and unable to respond in reasonable timeframes. "Better staffing with manageable caseloads is vital, so the claimant's needs are met," she says.

She also says many assessors haven't done enough technical training, so they often ask claimants for unnecessary material, make wrong decisions or 'tick and flick' documents without reading them. O'Neill says all these factors cause unnecessary delays for those making claims.

Will a new insurance code help people making claims?

A new version of the Life Insurance Code of Practice came into effect on 1 July 2023. This code, which is voluntary, means life insurers who sign up (including those who provide disability insurance through super), are agreeing to:

• only collect information they reasonably need to make an assessment
• request this information as soon as possible
• minimise multiple information requests.

Parrish says the code could be a positive step for claimants if insurers follow it. So far, most super funds haven't signed on to the code.

"Funds and insurers should embrace this focus on early and pragmatic decision-making, on clear and honest communication and never lose sight of the fact that at the centre of each insurance claim is an individual who deserves empathy, compassion and respect throughout the claims process."

Meanwhile, consumer advocates say the new code doesn't help claimants facing delays. "It's actually worse than the previous life insurance code," says Drew MacRae, senior policy and advocacy officer at Financial Rights Legal Centre.

The code could be a positive step for claimants if insurers follow it. So far, most super funds haven't signed on to the code

"[Life insurers] may be able to claim that they're meeting their life code requirements now that it's 15 days [timeframe to provide a written decision]. Their breach stats will look better, but they're not doing anything to shorten the length of time they take."

MacRae also says the code allows overly generous timeframes for life insurance companies to respond to complaints and then also says that these timeframes don't apply where there are "Circumstances Beyond Our Control". Reasons for this clause applying include the overly broad: "We [the insurer] have not had a reasonable opportunity to complete our assessment of your claim". Insurers could use this clause to delay claims even beyond the upper timeframe limit of 12 months.  

Super Consumers Australia policy manager Rebekah Sarkoezy says the code isn't the answer. "Australians forced out of work through disability deserve better than a voluntary code that gives insurers broad scope to drag their feet and leave people waiting for their much-needed financial support."

A review of insurance in super is overdue

Super Consumers Australia believes that insurance in super is in desperate need of a review. Nick Sherry, a former minister of superannuation, agrees. Sherry says this review could look at whether there is an alternative to the current system that would protect more Australians.

"Let's look at something better, stronger and more comprehensive outside super," Sherry says.

Sarkoezy says the ongoing problems with delays underscore that we need to find a better way.

"Australians deserve peace of mind that if they have insurance through super and make a claim, their insurer will quickly and fairly assess their claim and let them get on with their recovery. 

"A review of insurance in super could look at the big questions of whether there is a better way to ensure all Australians who become unable to work due to illness, injury or disability get the financial support they need."

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.

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