Life insurance termination will have to be straightforward under code

20 September 2017
| By Jassmyn |
image
image
expand image

Under the draft Life Insurance in Superannuation Code of Practice, life insurance premium caps will have a maximum limit of one per cent of estimated earnings and 0.5 per cent for members under 25, and cover cancellation would have to be straightforward.

The Insurance in Superannuation Working Group (ISWG)’s draft code was released today after 10 months of development.

On premium caps, the group said trustees could determine the level of earnings they used to carry out the assessment, based on the particular characteristics of their membership, their period of membership, and relevant segments therein.

ISWG’s consultation paper said this would help protect account balances from inappropriate erosion.

The code said it required trustees to make the cessation arrangements, or ‘opting out’ of automatic cover straightforward and transparent for members.

“Members must be able to cancel through a fund’s website, over the phone or via email. Instructions on how to cancel must be provided clearly in member communications,” the paper said.

“One of the code’s significant protections of member account balances is the requirement that trustees cease a member’s cover where no eligible contributions have been received for 13 months, unless the member advises that they want to retain the cover.”

ISWG said the 13-month period was measured from the end of the period covered by the most recent eligible contribution where this was known by the trustee, otherwise the measure was the date of the most recent eligible contribution. The intention was for the period of no contributions to not exceed 13 months wherever possible.

ISWG chair, Jim Minto, said: “Importantly, the draft code includes measures to address the impact of insurance on retirement incomes and, in particular, the impact on low income earners, young people, those with less secure employment and women”.

Other key elements of the code included benefit design, duplicate insurance cover, member communication initiatives, better claims handling initiatives, and better data standards and improved transparency arrangements.

 Minto said feedback was welcome before the final version was to be published by the end of 2017, and that it was also intending to see the regulator’s authorisation of the code and to have enforceable arrangements to ensure compliance.

The code is intended to apply to all Australian Prudential Regulation Authority (APRA) regulated super funds that offer insurance from 1 July 2018, with a transition period of 12 months.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Co...

1 day 14 hours ago

Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum....

1 day 14 hours ago

In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges....

1 day 15 hours ago