Comparing Industry Super Fund Insurance and Retail Insurance

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It’s a question that rolls through our offices a lot. New clients often ask, “will my industry super fund really pay out my entitlements?” Will they truly live up to what they say in their product disclosure statements?

In black and white cases they are generally likely to pay out your entitlements, but, in the insurance and super space the complication doesn’t end on the first page.

In my own personal experience I’ve worked with two separate clients on their claims through 5 different industry super funds both claiming total and permanent disability for being unable to work.


In 2017, just over 555 billion dollars of hardworking Australian money sat in Australian industry funds. The industry super funds have been marketed as having lower fees (this is especially the case in the barefoot investor’s book where he selflessly promotes Host Plus as the cheapest industry super fund) and they often argue they are only run to profit members. Whilst this is largely true, the question needs to be asked how can they have these lower fees? What costs are they actually cutting to achieve this?

Most people who have an industry super fund account will have some level of default insurance. Premiums are typically cheap, much cheaper than their retail counter parts. But why is this so? As always, the devil is in the detail and, in this case, the devil is in the product disclosure statement, your industry super fund’s claims department and the length of time to get a result.


Industry super funds deal in group cover where you are pooled together with everyone else. This can make it much cheaper than an individual contract as you essentially are getting a bulk discount that benefits everyone. In practise, industry super funds have shopped out their insurance book to many different insurers with the aim of ultimately getting the cheapest premiums to members as possible. Insurers will compete for the insurance book by offering cheaper premiums, however this discount often comes from changing what can be claimed on (the definitions).

This brings truth to the saying that cheaper doesn’t always mean better.

Everyone in the group thereby also has the same rules as to what can or can’t be claimed. Problems can tend to arise when decisions are made to benefit the majority of the group, not factoring in the outlier individuals, which could be you or I. If the trustee (fund manager) of the fund makes a decision, such as a change to the rules to benefit the majority and you’re in the minority, there’s nothing that you can do but accept the negative consequences.

Fact: With trustees continually aiming to get cheaper premiums for their members the chances of being eligible to claim may become smaller and smaller.

In 2017 Financial Framework was one of the largest insurance claim specialists for the Australian Industry Super fund in the country.


An example of this in practise is the case of ‘Mrs Jones’ verses REST that was finalised in court last year. Her lawyers lodged a claim with REST on her behalf in early 2013. It was rejected by the insurance company, on the grounds that Mrs Jones had ceased to be covered by the policy a number of years earlier. A technical clause hidden on page 35 of the product disclosure statement stated the TPD insurance for individuals ceases to be covered 72 days after they stop working for a contributing employer. Ms Jones had not worked for her employer since October 2010.

Also buried in the fine print is another clause that invalidates the TPD policy when the former employee has a balance of less than $3000 in the related default super account. Ms Jones had about $1500 in her REST account at the time of her catastrophic spinal cord injury.

In July 2013, three years after the policy was supposedly null and void, Ms Jones’ REST member statement clearly stated she was still being charged a premium for TPD cover and was entitled to a lump sum payout of $111,000 in the event she was totally and permanently disabled.


In my own personal experience I’ve worked with two separate clients on their claims through 5 different Australian industry super funds both claiming total and permanent disability for being unable to work. Client 1 was a 44 year old female who had a degenerative back disorder preventing her from sitting or standing for long periods meaning she was unable to work. It took us approximately 60 calls back and forth between us and her two industry super funds, 70 hours of time, countless forms and 14 months total to get our client what she was owed. In the end, we had to lean heavily on our contacts on the retail side to have process completed.

The second client was a 54 year old women who suffered from diabetes, had a stroke and was suffering from severe depression. Anyone meeting her for the first time would know instantly that she would never be able to work again. Unfortunately, the process and the experience was exactly the same with it taking 15 months to have the claim completed and us again having to lean heavily on our contacts on the retail side to have it finalised.


What is often failed to be mentioned during these traumatic cases is the emotional roller coaster these men and women suffer throughout the entire process in their uphill battles to have their claims approved.

There is no doubt in my mind that, without our help, their claims would never have gone through.

From my experience, the process is designed to bury you in paperwork so you eventually give up or are paid a lesser sum than you are entitled.

This result would be very different in the case of a retail insurance contract that is between yourself and the insurance company where the terms and conditions are much more transparent. No changes can be made to your contract unless you accept them.

As a result of my own personal experiences and supporting clients throughout their own traumatic experiences, I’m happy to pay a higher premium to get access to the benefits and assurity of a retail insurance policy. The value and certainty of knowing you will be paid in a timely manner and not buried in forms is more than worth the peace of mind as opposed to saving a few dollars on the front end.

Will my industry super fund insurance actually pay me? Well, ultimately you get what you pay for.

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