There is a great insurance rip-off in Australians' superannuation funds that most people do not even know is happening, and it discriminates against casual workers.

Key points: Most workers have life and disability insurance through their super fund

Most workers have life and disability insurance through their super fund Casual workers have to pass a tough "activities of daily living test" to be paid out for disability

Casual workers have to pass a tough "activities of daily living test" to be paid out for disability One experienced lawyer in the sector said he has never seen a casual meet the test

Around a quarter of the Australian workforce is casual, and 40 per cent of those casuals are under the age of 25. Most casual workers are found in reasonably low-skilled occupations.

According to research by Federal Parliament, 41 per cent of casual workers are either labourers or sales people. Only 13 per cent are employed as managers and professionals.

All casuals earning more than $450 a week from a single employer are in a superannuation fund.

Most are in default "MySuper" funds, which offer life insurance on an 'opt out' basis.

Many would not even realise they have insurance, which they are paying for out of their super fund, and those who do would probably think they are protected if they have an accident at work.

They could be very wrong if the people the ABC has been speaking to are any guide.

Banks profit from blanket denial of casuals' claims

Little more than a week after the bosses of the big banks told a parliamentary inquiry they were cleaning up their act, there is more evidence of ordinary Australians being ripped off in the name of higher profits.

The superannuation industry, of which the banks are a major part, is generating billions of dollars from disability insurance on which casual workers have virtually no hope of making a successful claim.

Sydney based Eva Thorley is an example.

"I worked from 7am till 3:30 in the afternoon, overtime was included if there was any. You know I worked for this company for like seven years. As a casual but working permanent hours," explained Ms Thorley.

She worked full-time as a furniture removalist until a 60-kilogram safe fell on her foot.

Ms Thorley suffered a severe injury and when she tried to claim on her total and permanent disability insurance policy with CommInsure, it was denied because she was employed as a casual.

"I can't help that I was casual. The company. That was their policy. They didn't want permanent staff. They only wanted casuals," she said.

Meanwhile, family circumstances forced Launceston truck driver Darren Woodward to switch from permanent to casual employment.

On his first day as a casual, doing the same job with the same company the following week, he fell off a truck and will never work again.

His total and permanent disability claim was also denied, by MLC.

"I thought it was a bit of a joke actually," recalled Mr Woodward.

"I thought someone was taking the mickey out of me. Because when you're insured I thought you were insured."

The cases of Darren Woodward and Eva Thorley are far from unique according to solicitor Carl Mickels from Firths Lawyers in Sydney.

He said it is discrimination against people employed as casuals who pay the same premiums and have the same risks as permanent staff.

"I find it appalling that this could occur when the person hasn't changed his occupational status. All they've done is change their hours from full-time to casual," he said in reference to Darren Woodward's case.

'Junk insurance' for casuals

What it means is you can have two people sitting side by side, doing the same job and working the same hours.

They both slip on the same banana skin and suffer the same career ending injuries.

But because one person is permanent and the other is casual, they are treated very differently by their insurer.

"There's no rhyme or reason why you would treat casuals differently from permanents," said Mr Mickels.

The way insurance companies discriminate against casuals is to apply a much tougher claims threshold.

Permanent employees get measured against their ability to perform either their own occupation, or any other job they may be qualified for.

Casuals are measured against what is known as the "activities of daily living test".

Unless casuals need help doing the most basics of life - things such as going to the toilet, washing, or getting out of bed - the claim is denied.

A worker has to be virtually a quadriplegic to pass.

"In my experience, I can't recall ever satisfying them over probably 10,000 clients I have dealt with," explained Mr Mickels, who has been working in this area for nearly two decades.

"It's an impossibly high bar. It essentially makes the insurance junk insurance. Nobody can collect it."

But the insurers are collecting, about $6 billion a year from policies offered automatically with superannuation funds.

"It's totally unethical and it denies any duty of care on the part of the insurance company to provide a person with the insurance that the person they're providing the insurance to thinks they have," said Professor Thomas Clarke, who is the head of the Centre for Corporate Governance at the University of Technology in Sydney.

There are 28 million superannuation accounts in Australia.

Around 15 million, or 53 per cent, are default funds, known as MySuper, which are chosen for workers by their employers.

My Super funds offer life insurance on an 'opt out' basis - and the vast majority of people do not opt out.

"It was done through the company I was working for. They organised it all. Me and the other workers that I worked with had nothing to do with it," said Ava Thorley about her situation.

According to the corporate regulator, ASIC, 16 per cent of total and permanent disability insurance claims are knocked back - the highest rejection rate of any form of life insurance.

One company, which ASIC will not name, rejected 37 per cent of claims - or more than one-in-three.

Danger for growing casual workforce

The legislation covering insurance in super says trustees of super funds must act in the "best interests" of the beneficiaries of that insurance.

But a 2014 letter from Queensland based LGIA Super, defending a claim from a casual worker it rejected, seems to sum up the industry's attitude.

It said, "the trustees are not obligated to provide insured benefits to all members on the same basis".

"The legislation specifically allows offering insured benefits of different kinds and levels," warned Mr Mickels.

"You need to be aware that you cannot trust your financial livelihood through your super if the trustees don't try to do the right thing by you."

That raises the issue of the genuine independence of some super fund trustees.

Eva Thorley's insurance was with CommInsure. Her super was with Colonial First State. Both are owned by Commonwealth Bank.

Darren Woodward's insurance was with the National Australia Bank-owned MLC and his super is an MLC fund.

"These conglomerate structures with separate divisions tend to pursue a corporate interest ultimately as their ultimate logic and the clients' interests are forgotten," said Professor Clarke.

Which, for Professor Clarke, is another danger signal for millions of people in a workforce which is now nearly 25 per cent casual.

"Here we have two individuals who have not had their insurance paid out for what are very unethical reasons," he said.

"But the worry would be that as casualization continues and expands to a larger and larger section of the population, not only are they losing their employment rights, they'll be losing their insurance status too."

It is cold comfort for the many casuals at the younger and most vulnerable end of the workforce and for older people too, including truck driver, Darren Woodward, who has learned the hard way that his total and permanent disability insurance was useless.

"You think you have every base covered in case the worst happens, but when it does happen you find out that the people you put your future in - all they want to do is knife you in the back and pull the rug out from underneath you."