Have Govt’s changes to insurance inside superannuation bounced?

30 March 2020

The Government’s changes to insurance inside superannuation may come back to bite it amid the COVID-19 fall-out with financial advisers pointing out that some superannuation fund members are at risk of unwittingly having their insurance cover cancelled from tomorrow.

That is when the Government’s Putting Member’s Interests first legislation cuts meaning that members with low balances who have not specifically opted in will have their cover cancelled, as of tomorrow (31 March).

In doing so, they have pointed to notifications from major insurers, including MLC Life, which has written to advisers stating: “On 31 March, 2020, some of your clients may have their insurance in super cancelled in line with the new Putting Members’ Interests First (PMIF) rules”.

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“Clients with low super balances, who haven’t told us they want to keep it, will have their insurance cancelled. This doesn’t apply to any insurance benefit for which the employer fully pays the premiums,” it said.

The PMIF legislation is intended to protect the account balances of those holding less than $6,000 unless they opt in.

The warning from advisers has come as a number of superannuation fund chief executives have told Money Management that while their call centres have been kept busy dealing with inquiries around investment switching and early access to superannuation, there has also been a high level of inquiry around insurance cover.

One adviser, Fairbridge Financial Services principal, Daniel Isenhood has pointed to the danger of medical personnel, particularly busy nurses who have multiple superannuation low balance accounts being adversely affected by the Government’s changes.

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The changes were never properly though through. It only looked at it from one angle - cost of cover eroding balance. It has been pushed through with seemingly minimal input from the industry.

When was "input from the industry" ever a thing????

Bureaucrats who never have to worry about a pay cheque and are holier than thou always know more than us dumb practitioners. They are already experts on how financial planning should be.

We know this cause they tell us they do.

It's a good thing. Plenty of notice has been given to consumers, and no longer will they have their low balance automatically funding insurance which they never requested.
It is also a good thing for advisers who will now be approached by those actually wanting insurance, and proper personal insurance rather than group insurance.

Agreed. It should go further though. Get rid of all new default insurance in super. It encourages a false sense of security and prevents people from taking personal responsibility.

How many times have we all heard "I don't need insurance because I've got it in my superannuation" when all they actually have is $50K life/TPD.

And group insurance is often substandard with their definitions, and increasingly becoming more expensive than personal cover. It should be opt-in rather than opt-out. Industry funds won't like losing their commissions, but that is where we're at.

ChrisC, there’s clear cases where your point would be true. However the blunt instrument of the law has meant some people will be harmed, potentially severely. Fighting Australians and their general apathy towards these issues is very difficult.

Poorly constructed legislation is however not the answer.

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