The call by Financial Services Minister, Stephen Jones, for the life insurance sector to lift its game when it comes to delivering the desired benefits of life insurance inside superannuation, drew the attention of a good many Riskinfo readers this week…
The life insurance sector must lift its game when it comes to delivering the desired benefits of life insurance inside superannuation.
That was one of the key points made by the Assistant Treasurer and Minister for Financial Services, Stephen Jones, when speaking at an industry event on Tuesday. Among his concerns are delays in life insurance payouts.
“I’m calling on the whole financial industry to unite behind a clarified purpose of the superannuation system,” he said.
“And I’m calling on funds and insurers to lift expectations. To lift standards. And to lift outcomes for members. They have to come first, second and third. Nothing else matters nearly as much.”
He said for insurance in superannuation to achieve its desired benefits, the insurance sector needs to lift its game, stating that:
- Members have to come first
- Products have to be tailored to their needs
- They need to be affordable “because the premiums are paid from retirement savings”
- And insurers need to pay out in a timely fashion for appropriate claims
“Based on information from the Australian Financial Complaints Authority, insurance companies can do better,” he said.
Jones said a third of all superannuation complaints relate to TPD and income protection, and that three of the top five types of superannuation complaints relate to insurance.
“AFCA is receiving two complaints a day just for delays in claims handling,” he said. “For insurance to be a benefit of superannuation, the customer experience must improve.
“Members have to be at the centre of the system.”
Around 5.5 million Australians rely on the default life insurance coverage provided by their superannuation trustee.
Maybe someone should explain to the Minister that risk cover offered by his mates in the industry funds has always been just a marketing ploy i.e. it’s just another set of steak knives from the ISA. Trustees in the older funds (i.e. not Simple Super) have always had the discretion to withdraw cover entirely, change insurers at short notice or change terms and conditions at their whim and fancy.
The funds actually advertise life and TPD cover at “$1-50 a week.” That’s their marketing ploy, because they know that most punters, firstly are not aware they have any cover and secondly, are never made aware of the nasties in the policy – i.e. decreasing levels of cover on a set formula past the age of 37 or thereabouts. Then there’s the added extras, occurring on an increasingly repeating basis, the insertion of the dreaded word “REHABILITATION” in the standard SIS any occupation TPD definition.
The good folks who work for Mr Jones who are members of the PSS AP are generally not aware that the PSSAP TPD definition’s specifies a 24 month qualifying period, not the industry standard three months qualifying period, wherein the member must be permanently disabled before any claim can be considered
Better start closer to home Jonesy!
Any improvements to terms and conditions on the type apparently favoured by Mr Jones would see a number of insurers withdraw from what is a very profitable but short-term enterprise where most trustee contracts with insurers are limited to 3 years. What comes next will be underwriting, and that’s expensive, and nasty, particularly when members are refused cover for all the reasons that our clients are refused cover.
It’s an interesting message from Mr Jones to his mates the trustees. I suspect that what Mr Jones is actually saying to the Trustees , and their insurers, is code for “reduce the sum insureds to nominal levels, so that you can pay the claim quickly, so as to stop drawing nasty attention to yourself in the media”. Or perhaps, then the only answer will be accidental death and accidental TPD cover.
Then of course there’s the other problem with from QAR. If the industry funds start employing real qualified advisers, and not just backpackers having a break in the city from picking grapes, those advisers will have to take on the responsibility of the advising their member clients that their insurance in their industry fund may just not be fit for purpose.
Standby to repel boarders!!!
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