Large changes to automatic life insurance offered via superannuation funds

The Australian Tax Office (ATO) has recently provided an update on various topics regarding superannuation, including life insurance.  In their update, the ATO noted that they have received just over two million member account reports changing the insurance indicator on an account from ‘yes’ to ‘no’, indicating the number of accounts impacted by Protecting Your Superannuation policy measure.  This means that as many as two million super accounts reported cancelled insurance as a result of the Protecting Your Super Package.  You can see the presentation here.

The next change on the horizen for life insurance arranged automatically via a superannuation fund is the proposed Putting Members Interests First (PMIF) Bill.  Under the proposed Bill, default (automatically applied) life insurance cover can only be offered to members under age 25, and to those holding low-balance active accounts of at least $6,000 on an opt-in basis.  This may impact many members and may also lead to a rise in insurance premiums and additional evidence of health being required to obtain insurance.

In other news, in an article released to the industry this week (see here) an actuary writes under the heading “Where has all the competition gone ?” that “with only three active insurers in the large industry fund space as compared to ten global reinsurers available to offer capacity, there is a clear oligopoly at play as access to competition is indirectly being limited by the gatekeepers (insurers) to the reinsurance market”.  Experien Insurance Services are concerned to note the term “oligopoly” being used with automatic insurance arranged via superannuation accounts.  We work with over 10 insurers to find the most suitable insurance for our clients and believe that a wide range of insurance options and increased competition is important.  Contact us here if you would like to discuss this further.

Please note that the above is extracts on general information and you should not act on it, or rely on it, without obtaining personal advice.