FSC to ban occupational exclusions
The Financial Services Council (FSC) is banning occupational exclusions in default group life insurance in superannuation for its super and life insurance members from 1 January, 2023, following a period of consultation.
The ban would be part of an enforceable FSC standard to prohibit the use of exclusions and restrictive disability definitions because a super member was employed in a high-risk occupation.
The ban also followed the Your Future, Your Super stapling reforms that would see some consumers unable to claim on life insurance cover because the fund had occupational exclusions in its default group life insurance.
The enforceable FSC Standard would:
- Apply to all default cover for life insurance, total and permanent disability and income protection insurance in MySuper and Choice products; and
- Prohibit the use of exclusions and restrictive disability definitions because a member was employed in a high-risk occupation.
The FSC said it recognised that Australians must be able to claim on the default cover that they have been paying for through their super.
The ban however did not prevent trustees from choosing not to offer cover to a new member based on their occupation when the member joined the fund. In these circumstances the member would not be charged insurance premiums. The standard would also not apply to individually underwritten life insurance in super.
The target date of 1 January, 2023, would be subject to further consultation with regulators and the Australian Competition and Consumer Commission.
It said the 12-month transition period would allow trustees and life insurers to re-negotiate existing group life policies that were in place and to engage with members.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
