Too much insurance across multiple superannuation accounts can result in “rapid erosion” of super balances, says the Insurance in Superannuation Working Group (ISWG) which is working on ways to address the issue.
ISWG Chairman Jim Minto said too many people have multiple superannuation accounts, and though insurance benefits are valuable, too much can result in a “rapid erosion of retirement savings”.
“Ideally, people would consolidate their insurances and avoid this, but we must provide solutions now to address the reality of multiple, automatically provided life insurance arrangements,” he said.
The ISWG is calling for submission on the recently released discussion paper, Account balance erosion due to insurance premiums, which proposes the superannuation industry take the following actions:
- a set of defined insurance principles that will assist superannuation funds to make decisions on insurance design for different cohorts of members
- there be a defined maximum premium level that can be charged for automatic insurance
- there be a defined and consistent definition across funds, for when insurance cover ceases and recommences
- formalisation of protocols between insurers for the treatment of claims against multiple income protection policies
- the establishment of standards for refunding premiums for claims made against multiple income protection policies
- assisting members to make informed decisions about the insurance they hold in superannuation
“Industry and stakeholder feedback will help shape an enforceable Code of Practice and Good Practice Guidance for Trustees, to be published by the ISWG later this year,
Submission in response to the discussion paper are due no later than 7 April 2017. Details on how to make a submission can be found here.
The ISWG plans to release two further discussion papers in the coming weeks.
The Insurance in Superannuation Working Group comprises AIST, ASFA, FSC, Industry Super Australia and the Industry Funds Forum.