AIA: Super reforms will leave people without crucial cover
Published 27 Jun 2018
The federal government recently announced major reforms to superannuation in Australia. But the country’s largest group insurer has argued the changes will leave 1.4 million young people without death and injury cover.
Unveiled in May’s 2018-19 Budget, the Protecting Your Super package proposed three major amendments to existing rules:
- Capping administration and investment fees at 3 per cent of the account balance for super savings that total less than $6,000.
- Strengthening Australian Taxation Office powers to reunite members with money left in inactive accounts.
- Making insurance an opt-in model for members who are aged under 25, have balances below $6,000, or haven’t received a contribution in 13 months or more.
However, AIA believes moving to an opt-in approach will only increase super balances by 0.27 per cent at most, the equivalent of just $1,400 over the average working life. The insurer based its forecasts on Rice Warner research.
Professionals in high-risk sectors could lose out
AIA Australia and New Zealand CEO Damien Mu said the trade-off between losing vital financial protection against serious injuries and illnesses is not worth the minimal gain in lifetime super.
“One of the more serious consequences of the proposed policy change is that people working in casual jobs and high-risk occupations – such as mining and construction – may be unable to attain life insurance, particularly for disability,” he stated.
“This is because group insurance schemes were designed to accommodate a broad spectrum of risk across the nation’s policy holders, and a change to the default model would leave these members exposed where there is some form of underwriting.”
Furthermore, the reforms could lose the federal government and the Australian economy $2.46 billion a year, according to the Rice Warner research.
Productivity Commission report prompts reforms
The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 was introduced into parliament last week, which means the changes are likely to come into effect despite protests from insurers.
A damning Productivity Commission report, which highlighted a number of inefficiencies in superannuation funds, prompted the reforms. Multiple accounts, excessive fees and ‘zombie’ insurance policies were among the key problems outlined in the study. Nevertheless, insurance can provide a vital financial safety net for people who become injured or ill, although insurers often turn down legitimate claims.
That’s why you should contact Gerard Malouf & Partners Superannuation Lawyers if you’re struggling to access benefits from your fund’s insurance policy. We can help you challenge the decision and receive any money to which you might be entitled.