The FSC is initiating a process to consult with the superannuation and life insurance sectors, consumer advocates and other stakeholders with the aim of removing exclusions based on occupational classification within default group life insurance policies in MySuper.
The council says in a statement that the Government’s ‘Your Future, Your Super’ reforms introduced an “important” consumer protection to ‘staple’ superannuation members to their fund, so that they take their account with them from job to job.
It says stapling was a recommendation of the Royal Commission into Banking and the Productivity Commission’s report into the efficiency and competitiveness of the superannuation system.
The council says it strongly supports the implementation of stapling “…as it will prevent the creation of duplicate accounts that cause the erosion of superannuation savings.”
Small number of instances
However it says in a small number of instances superannuation members can be stapled to a MySuper fund that has default group life insurance that contains exclusions based on occupational classification.
“In a small number of instances when an employee moves between occupational classifications, at time of claim they may find themselves unable to claim against their default insurance coverage in the MySuper product,” it says.
The council adds that this concern was raised by stakeholders during Parliamentary debate and “…the FSC and life insurance industry agree that it is in the best interests of consumers to design a solution, now that stapling is legislated to take effect from 1 November 2021.”
It has issued a policy proposal that the life insurance and superannuation industries could implement to address this issue. Click here to access the policy proposal.
As part of this process the FSC says it would welcome feedback on the options outlined in the consultation paper to implement this solution and that it will also consult with the ACCC, ASIC and APRA.