The FSC has announced it will be introducing an enforceable FSC Standard to prohibit the use of exclusions and restrictive disability definitions because a member is employed in a high-risk occupation.
The council says in a statement this will apply to all default group life insurance in superannuation amongst FSC members.
It states the standard will apply to both FSC superannuation and life insurance members.
The announcement follows a period of public consultation with retail and industry superannuation funds, life insurers and consumer advocates (see: Industry Initiative on Occupational Exclusions.)
The statement explains 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 superannuation account with them from job to job.
The FSC says recognising that under the new stapling regime some consumers may be unable to claim on life insurance cover because their fund has occupational exclusions in its default group life insurance, it initiated a process to achieve structural change to better protect consumers.
The enforceable FSC Standard will:
- Apply to all default cover for Life Insurance, Total and Permanent Disability and Income Protection insurance in MySuper and Choice products
- Prohibit the use of exclusions and restrictive disability definitions because a member is employed in a high-risk occupation
…the FSC and its members recognise that Australians must be able to claim on the default cover that they have been paying for…
The statement notes the FSC and its members recognise that Australians must be able to claim on the default cover that they have been paying for through their superannuation.
However, it says it will not prevent trustees from choosing not to offer cover to a new member based on their occupation when the member joins the fund. In these circumstances a member will not be charged insurance premiums.
It adds the standard will also not apply to individually underwritten life insurance in superannuation.
The statement notes that the FSC will soon finalise the standard with the target date of requiring trustees to remove their occupational exclusions and restrictive disability definitions for members in high-risk occupations by 1 January 2023, subject to further consultation with regulators, including the ACCC.
The 12-month transition period is designed to enable trustees and life insurers to re-negotiate existing group life policies that are currently in place, and for trustees to engage with members.
The council says the success of its initiative will be dependent “…on the Government facilitating better data sharing between trustees, insurers and Government agencies, particularly the ATO, to improve the quality of data on members’ occupational classifications.”
This will be a key FSC recommendation to the ongoing Treasury review of occupational classifications.
Click here to see submissions to the FSC’s consultation process.