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Life insurance cover at risk from reforms
Research from MLC Life Insurance has revealed 60% of superannuation fund members have never heard of the superannuation stapling reforms, potentially leaving them with inadequate or no life insurance protection when they change jobs.
The reforms, which came into effect on 1 November 2021, required employers to make superannuation contributions to an existing fund for new employees, unless the employee decided otherwise.
More than 70% of Australians held life insurance inside superannuation. In 2021, 45,000 claims worth $3.7 billion were admitted for life and total and permanent disability (TPD).
Mark Puli, chief group insurance officer at MLC Life Insurance, said the research showed superannuation funds and their insurers needed to improve how they explained these reforms to members.
“It’s disappointing to see most members are unaware of stapling. We understand and support the intent of these changes - to reduce the number of Australians with multiple superannuation accounts - but in practice it means people won’t have the right cover for their circumstances,” he said.
“The average Australian changes jobs 12 times throughout their lifetime. In that time, they may get married, have kids, buy a home, and take on more debt. It’s imperative that members have the right cover for their needs and if they aren’t prompted to review it, they simply won’t.”
The survey of more than 1,500 members also showed that women were less engaged than men with their insurance with 37% of women saying they were engaged with their insurance, nearly 10% lower than men.
Under the reforms, if women took time out of the workforce to care for children for more than 16 months, their default life insurance was automatically switched off.
In other findings, the survey revealed:
- The majority (83%) of Australians with insurance in superannuation said it was important, however only 42% ever review their cover.
- Forty three per cent said they did not think the life insurance they had was right for their circumstances, and 71% said they wanted it to be more personalised to them, so that they only paid for what they needed.
- Encouragingly for funds, 58% of members who had modified their insurance said they were more likely to stay with their fund in future. However, worryingly, only 23% were aware that they could actually do this.
- Awareness of stapling reforms is lowest amongst Generation Z, with 68% not aware of them, higher that 66% for millennials.
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