When “Protecting Your Super” Leaves Australians Unprotected
Back in 2019, the government brought in the Protecting Your Super package and the Putting Members’ Interests First legislation. The idea sounded sensible enough. Stop people, especially younger workers and low-balance members, from having their super chipped away by insurance premiums they did not know they were paying. Fair enough. Nobody wants workers paying for cover they do not need, cannot use, or do not even know they have.
The Trouble with Broad-Brush Reform
But the trouble with broad-brush reform is that it often looks tidy in Canberra and messy in real life, and research from ASFA – the Association of Superannuation Funds of Australia – has confirmed the mess here is not small. It says around 5,000 Australians a year have died without life insurance cover since the “Protecting Your Super” changes came in, with families missing about $670 million in death benefits annually. It also says that about 11,000 people a year are missing out on about $1.5 billion in TPD benefits due to the same changes.
That is not a rounding error – not a technical glitch. That is a lot of ordinary Australians getting caught without a safety net.
And that is the part that should give everyone pause. In the world of super and insurance, there is always a temptation to talk in policy language: balance erosion, inactive accounts, opt-in settings, and disengaged members. But behind all that polished language are real people. A young tradie hurt on the road. A casual worker with patchy work history. A self-employed person who lets one account go inactive while keeping their head above water. A family that only finds out after a death or a diagnosis that the cover quietly vanished months or years ago. The research is clear: turning insurance off by default often leaves people in the dark.
Creating a Worse Problem
There is nothing wrong with trying to stop waste. There was a genuine problem with duplicate accounts and duplicate premiums. Members were paying for multiple policies across multiple accounts when, in many cases, they could not claim on all of them at once. No argument there. But solving one problem by creating another, bigger problem is not clever reform. It is just moving the pain around.
And here, the pain has landed on the people least likely to keep up with the fine print. Under the reforms, insurance was cancelled on accounts inactive for 16 months, and default cover was removed for members under 25 and for accounts with less than $6,000. About five million super accounts lost insurance cover as a result.
The groups hit hardest include younger workers, self-employed people with inactive accounts, and lower-balance members who had not yet reached the threshold. In other words, the very people most likely to be busy, stretched, under-informed, or simply trying to get on with life were expected to actively navigate a system that many seasoned professionals struggle to explain clearly.
That is where the policy lost the plot.
A Safety Net
A good safety net should be easy to keep and hard to lose. This one seems to have become the opposite. Easy to lose, often without knowing, and hard to recover once the worst has happened. There is something fundamentally upside down about a system where a person can be working, contributing to superannuation, and still be uninsured because their balance had not crossed a threshold or because an account slipped into inactivity. The article notes there are roughly 12 million Australians receiving employer super contributions, but only about 9.3 million with death cover and 8.2 million with TPD cover through their fund. That is a sizeable gap.
What makes this even harder to swallow is that, on the article’s account, the group insurance products inside super appear to be doing exactly what they are supposed to do. Claims-paid ratios exceed 100 per cent for group TPD and disability income insurance, and claim admittance rates sit in the mid- to high-90 per cent range. So this is not really a story about dud products. It is a story about access. About people being locked out before they ever get the chance to claim.
The Fix
ASFA’s proposed fixes sound less like radical change and more like common sense. Lower the age threshold from 25 to 21. Give new full-time workers default coverage on their first day of work, rather than waiting until the account hits $6,000. Replace automatic cancellation on inactive accounts with a more active and informed opt-out process. None of that seems wild-eyed or reckless. It sounds like an attempt to put the pendulum back somewhere near the middle.
Because that is really the point. This should never have been a choice between protecting super balances and protecting people. The system ought to be capable of doing both. If the only way to preserve a few thousand dollars in retirement savings is to leave workers uninsured against death or permanent disability during their working lives, then the policy settings are out of whack.
Why Superannuation Insurance Matters for Australian Families
Superannuation is meant to serve people, with insurance inside super, not some decorative add-on. For many families, it is the only life cover or disability cover they will ever have. Strip it away too easily, and you are not cleaning up the system. You are leaving people exposed.
Good intentions matter. But results matter more. And if thousands of families are only discovering too late that the cover they thought they had had been switched off, it is time to stop congratulating ourselves on tidy reform and start dealing with the human consequences.
There is, of course, plenty to know that is not covered here, and as the usual legal disclaimer goes, the information here is of a general nature because legal advice always depends on your circumstances.
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