POWERED BY MOMENTUM MEDIA
Law firm warns against further group insurance removal
The commencement date for switching off insurance inside super for low balance accounts should be deferred to 1 October, this year, according to a leading superannuation and insurance lawyer, following a proposal from the Government that the removal of default group cover for inactive accounts be extended to their low balance counterparts.
Berrill & Watson Lawyers principal, John Berrill, yesterday wrote to the Senate Standing Committee on Economics urging the deferral, saying that more time was needed to identify and contact impacted super fund members, and to allow funds to negotiate new group contracts or amendment with their insurers if needed.
Both insurers and super funds alike flagged the former concern repeatedly in the lead-up to the 1 July commencement date for the initial removal of default cover for inactive accounts this month, warning that some members would be left high and dry without insurance unintentionally as they had been unable to communicate with them.
Further, while Berrill offered his support to aspects of the Treasury Laws Amendment (Putting Members’ Interests First) Bill, which proposed the new removal category, he cautioned that switching off insurance inside super for low balance accounts puts vulnerable workers in dangerous occupations at unnecessary risk.
While the Explanatory Memorandum (EM) accompanying the bill acknowledged that those with low balances tended to be low income earners, women and seasonal workers, Berrill believed that indigenous Australians, new migrants, people with disabilities, and workers in industries with problematic employer compliance with super obligations and the gig economy.
“People from such cohorts work disproportionately in physically demanding or high-risk occupations and their only opportunity to obtain affordable insurance cover would be through group insurance in superannuation,” the letter warned.
“If they are locked out of default cover for a significant period of time, they would be exposed to the risk of disability or death without any insurance to top up their meagre account balances and thereby they (or their dependents) would almost certainly be reliant on Centrelink income support.”
Further, the law firm said that the EM failed to acknowledge the progressive effect of an insurance payout on a low balance account; a $200,000 total and permanent disability payout to a $5,000 account, for example, would have a proportionately greater impact than that same payout to a $500,000 balance account.
Adding to this, Berrill said: “Whilst the rate of group insurance premiums is not linked to account size, they are often tied to age and gender, with cheaper premiums routinely charged to younger members and younger women. This ameliorates the regressive effect of premiums on low balance accounts.”
Recommended for you
The insurance company has joined this year’s awards as a principal partner.
The $135 billion fund has transitioned away from TAL Life Insurance following an “extensive tender process”.
The $80 billion fund is facing legal action over allegedly signing up new members to income protection insurance by default without active member consent.
In a Senate submission, the Financial Services Council has once again called for further clarification that the government will assess the consumer outcomes of group insurance against the enshrined objective of superannuation.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
