The industry ombudsman has backed a superannuation trustee that failed to tell a member a $225,000 increase in her total and permanent disability cover was subject to exclusions.

In September 2019, the member applied to raise her TPD cover from $125,000 to $350,000, and AIA Australia accepted this but imposed exclusions relating to her back and left wrist.

The insurer’s acceptance terms were provided to Commonwealth Superannuation Corporation, but the trustee did not pass them on to the member.

The woman suffered a left wrist injury at work in May 2022 and stopped working. She then developed psychological conditions that affected her ability to return.

She lodged a TPD claim in March 2024. AIA accepted it under her default insurance and paid $75,000, but it rejected any benefit under the increased cover.

When the communication failure came to light, CSC cancelled the increased cover retrospectively to October 2019, refunded $10,327 in premiums and offered $1968 compensation for lost earnings.

The member argued she should instead have been treated as having held the additional cover and been paid the extra TPD benefit.

The Australian Financial Complaints Authority acknowledges the trustee’s error but says its response was fair because the policy required members to be notified of non-standard terms before increased cover began.

It found insufficient evidence the error caused a compensable loss. There was no evidence the wrist exclusion would have been removed or the member could have obtained equivalent unrestricted cover elsewhere.

The increased cover was also subject to an exclusion around TPD caused “wholly or partly, directly or indirectly, by active service in peacekeeping forces, whether armed or unarmed”.

The member had post-traumatic stress disorder linked, at least in part, to past overseas peacekeeping service. This would have affected the psychological component of her claim, AFCA finds.

Even if the increased cover remained in-force, the member did not establish the additional TPD benefit would have been payable.

See the ruling here.