Rice Warner Actuaries has suggested that changes introduced in the 2009 Federal Budget will have an indirect impact on the Australian Life Insurance industry.
In its latest Touchstone newsletter, the actuaries form the opinion that while there was no significant impact from the Budget on the Life Insurance industry, there are a number of interesting potential consequences to the Industry as a result of changes to superannuation and pension rules. Rice Warner believes that:
- The reduced cap on concessional superannuation contributions will mean more people will structure their life insurance coverage outside of the superannuation environment. This is in order to maximise the amount of concessional contributions that can be allocated to the individual’s superannuation retirement benefits.
- The proposed paid parental leave scheme may see:
- Employees who make voluntary superannuation contributions via salary deductions needing to state whether they want to continue these contributions while on paid parental leave, even if their salary may be significantly reduced; and
- Group life insurance schemes that currently do not allow continuation of cover whilst the employee is on parental leave possibly needing to be reviewed
- The raising of the pension eligibility age to 67 in future may see demand for lump sum and income protection/salary continuance products to offer cover through to age 67, where many products currently cease cover at age 65 or earlier
Other than the indirect impact of the 2009 Federal Budget on the life insurance industry, Rice Warner’s main issue is that the Budget represents another ‘missed opportunity’ for superannuation reform:
‘Arguably the government has taken a few small steps towards its objective of improving equity and adequacy in the retirement savings system. Unfortunately, the broader superannuation changes needed have been ignored due to the focus on the huge government deficit.’
