The arguments calling for the removal of insurance from superannuation are baseless, according to Maurice Blackburn.
In a submission to the Government’s Retirement Income Review, the law firm said these calls were flawed assumptions.
The calls were:
“There is a growing body of evidence that the disengagement of consumers with their financial situation in general makes them less likely to opt into insurance, even if it is entirely appropriate for their circumstances (for example, if they have dependants),” the submission said.
The firm pointed to Rice Warner analysis that found if group life insurance were to become opt-in, many individual’s only recourse would be to seek retail type insurance and would act to reduce their access to insurance or make it only available at unaffordable premium rates.
“This shows that disparity in workers’ access to insurance is not restricted to availability. The premium cost impact of functionally removing insurances from superannuation has the potential to be profound for some,” Maurice Blackburn said.
“The underinsurance problem in Australia has been well documented. Member disengagement data would indicate that worryingly few consumers consider their insurance arrangements at all.
“Further, for those who do decide to seek their own coverage, it cannot be assumed that the product they end up with will be in their best interests.”
The law firm said insurance in super had a critical role in helping the under-insurance problem by providing a safety net of affordable default group cover.
“It would be irresponsible, from a retirement savings perspective, to simply leave it to individuals to proactively obtain their own insurance. The consequences of doing so would be to the detriment of retirement comfort and security,” it said.
On Workers’ Compensation systems, Maurice Blackburn said it could not take the place of insurances providing for retirement income, should a working aged person become injured.
It said this was because:
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.