While the call to ban risk commissions inside super is the major insurance topic stemming from the Cooper Review,\u00a0it is only one of sixteen insurance recommendations made in the Super System Review Final Report.<\/p>\n
These recommendations, in Chapter 5 of the Report,\u00a0cover the need for superannuation members to have adequate default cover and also to\u00a0be better able to understand and compare their insurance policies.<\/p>\n
The Cooper Review Panel considers that life and TPD insurances strongly support the principles of the superannuation system. It says that in the MySuper sector, where members are least likely to give consideration to their insurance needs, the trustee should be required to offer life and TPD insurance on an opt\u2010out basis.<\/p>\n
Recommendation 5.1<\/strong><\/p>\n Life insurance cover and TPD cover (where available, depending on occupational and demographic factors) must be offered on an opt\u2010out basis in MySuper products.<\/em><\/p>\n The Panel says those MySuper members who do give consideration to their insurance situation should be able to opt\u2010out or to purchase additional units of cover, if offered by the trustee.<\/p>\n But it adds that where members decide to accept the financial risks of death or disability, perhaps because they have no dependants, or would prefer to take out insurance outside their superannuation, then this should be allowed. It says the retirement benefits of members should not be reduced by unwanted, but compulsory, insurance.<\/p>\n Recommendation 5.2<\/strong><\/p>\n The requirement for a minimum level of life insurance that must be offered by eligible choice funds as set out in Regulation 9A and Schedule 1 to the Superannuation Guarantee (Administration) Regulations 1993 should be repealed.<\/em><\/p>\n The Panel says the role of a trustee in selecting an insurer is analogous to the trustee’s role in investing member funds. The Panel therefore believes that all trustees should have a new statutory duty to manage insurance:<\/p>\n Recommendation 5.3<\/strong><\/p>\n Trustees of MySuper products, and trustees of large APRA funds that offer insurance, should have a statutory duty to manage insurance with the sole aim of benefiting members, including:<\/em><\/p>\n The fourth and fifth recommendations are based around the Cooper Review Panel’s belief that trustees should be required to devise and implement an insurance strategy, similar to the requirement for an investment strategy:<\/p>\n Recommendation 5.4<\/strong><\/p>\n The SIS Act should be amended to require trustees of MySuper products, and large APRA funds that offer insurance, to devise and implement an insurance strategy specifying the types of insurance to be offered and the default and permissible maximum levels of cover to be offered.<\/em><\/p>\n Recommendation 5.5<\/strong><\/p>\n APRA should issue guidance material to trustees to help them in developing an insurance strategy.<\/em><\/p>\n Recommendation six relates to the Review Panel’s belief that in the choice sector, trustees should not be required to offer any default insurance:<\/p>\n Recommendation 5.6<\/strong><\/p>\n In the choice sector, trustees should be allowed to offer life and TPD insurance on an opt\u2010out or opt\u2010in basis, or not at all.<\/em><\/p>\n Elsewhere in the Report, the Panel says it believes the SMSF sector should have no default insurance levels, but at the sane time, superannuation trustees should be required to consider life and TPD insurance for SMSF members as part of their investment strategy.<\/p>\n Recommendation seven seeks to extend the time (currently two years) in which a member can challenge a TPD claim after it has been denied:<\/p>\n Recommendation 5.7<\/strong><\/p>\n The Superannuation (Resolution of Complaints) Act 1993 should be amended to allow the Superannuation Complaints Tribunal to consider complaints in respect of TPD claims when the claim has been lodged with the trustee within six years of the member ceasing employment and the complaint has been made to the SCT within two years of the trustee’s decision.<\/em><\/p>\n Confusion over different definitions of TPD, especially when a member is changing funds,\u00a0has motivated the Panel to call for a ruling that will deem the definition of TPD in the current trust deed to correspond with the definition of TPD in an external insurer’s definition:<\/p>\n Recommendation 5.8<\/strong><\/p>\n The SIS Act should be amended so that the trust deed of a large APRA fund is deemed to define total and permanent disablement in the same way as the insurance policy held by the trustee at the relevant time.<\/em><\/p>\n Recommendation nine looks at income protection, with submissions leading the Panel to note that ‘…administrative and cost hurdles may prevent certain funds from offering income protection insurance as a default.’\u00a0 Because of this, the Panel has recommended more flexibility on offering income protection within super compared with Recommendation 1,which covers death and TPD cover:<\/p>\n Recommendation 5.9<\/strong><\/p>\n Income protection may be offered on an opt\u2010out or opt\u2010in basis, or not at all by trustees of MySuper or choice funds.<\/em><\/p>\n Recommendation ten stipulates clearly the panel’s view that no other types of insurance should be offered under super:<\/p>\n Recommendation 5.10<\/strong><\/p>\n Apart from life, TPD and income protection insurance, no other type of insurance (for example trauma insurance) should be permitted to be paid for by members through their superannuation and any existing policies outside those categories should be phased out.<\/em><\/p>\n Recommendation 5.11 addresses the Panel’s view that greater transparency should be provided and more information\u00a0given to members about their insurance cover and\u00a0claims history:<\/p>\n Recommendation 5.11<\/strong><\/p>\n Trustees of large APRA funds should be required to publish on their websites the terms and conditions applicable to each type of insurance offered by the fund, along with other information relevant to members, including:<\/em><\/p>\n… the retirement benefits of members should not be reduced by unwanted, but compulsory, insurance<\/h6>\n
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\ncover; and<\/em><\/li>\n‘… administrative and cost hurdles may prevent certain funds from offering income protection insurance as a default’<\/h6>\n
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