A key employers’ lobby group has accused various unions of receiving big payoffs by selling expensive yet inferior income protection insurance.

The Australian Industry Group, one of the most vocal advocates for the business community, says unions have pressured employers to sign up to costly insurance schemes that benefit no-one.

The Ai Group has urged the Heydon royal commission into union corruption to look into the alleged practice of pushing the schemes in exchange for big pay-offs from the insurers.

The lobby estimates up to 30 per cent of insurance protection paid by employers has been funnelled into union commissions.

Unions have wholly rejected the claims, with the ACTU saying such funds are used for post-redundancy programs such as counselling for health and wellbeing.

Accusations come as the Ai Group finalises its submission to the commission, which will be heard in coming weeks.

The group raised the same concerns about the insurance schemes in its recent submission to the Productivity Com­mission’s probe of public infrastructure.

It will make a series of allegations in its submission to the inquiry, as it believes the “inappropriate revenue streams” from commissions are being used for unions to offset the cost of declining membership.

The lobby also accuses unions of using the insurance gains to cover fines received for engaging in unlawful conduct.

“It is not appropriate for employers to be coerced to pay into funds where a portion of the amount contributed ends up with unions, and some employer associations,” the submission will say, according to News Corp publication The Australian.

“With construction industry redundancy funds there should be a requirement for the level of employer contributions to bear a rational relationship to a reasonable scale of employee redundancy benefits.

“At present, the employer contribution level is whatever the unions can coerce employers to contribute, typically through industry pattern agreements. This approach drives up construction costs because contribution levels far exceed the level that would be necessary to provide a reasonable level of redundancy benefits to employees.”