"Default life insurance 'eroding' super'." - The Hon Kelly O’Dwyer MP at the Life insurance Conference.
Government View
By Lachlan Colquhoun
The life insurance industry has been told that if it does not create better outcomes for people who hold default life insurance within superannuation accounts then the Federal Government “will step in and take action.”
Minister for Revenue and Financial Services Kelly O’Dwyer was addressing a plenary session of the Financial Services Council Life Insurance Conference when she said that many low income earners and young people were not getting “value for money” from the default life insurance policies they hold in their superannuation accounts.
“Industry has recognised that there is a pressing need to address this but the results have not matched the ambition of those leading this work.” the Minister said.
“Where industry cannot or will not act, the Government will step in and take action.”
The Minister went on to quote figures showing that at the end of 2016, 15% of retirement savings in APRA-regulated accounts were in life insurance premiums.
While it paid to be prepared with a “financial safety net,” the Government was concerned that many people, who were disengaged from their superannuation, were paying too much for their default cover “and not receiving value for money.”
“For low income and disengaged and younger members this is not a good outcome,” she said.
“We are concerned that younger people are defaulted into cover which does not meet their needs, and into cover they may not be able to claim on.”
Along with a concern that life insurance, in some cases, was “eroding super balances,” the Minister took aim at some Superannuation Trustees, and their responsibility towards fund members.
“I am not convinced that these obligations are taken as seriously as they could be,” she said.
Many people who are disengaged with their super, she said, accumulated a number of accounts as they move jobs.
These people were particularly at risk of having their super balances eroded by fees and premiums for life insurance.
“Situations like this need to be addressed."
“It is up to all of us, Government and Industry, to work towards fixing this.”