Insurance policies at risk
Insurance companies are mounting a last ditch effort to contact large numbers of Australians who are unaware their superannuation-related risk policies are on the verge of lapsing.
Under the new ‘simpler super’ rules, super funds cannot accept non-concessional (personal) contributions if the member has not quoted a valid Tax File Number (TFN). This will affect the non-concessional payment of insurance premiums, and, ultimately, if premiums are not paid the insurance policy within that superannuation fund could lapse.
Similarly, without a TFN concessional (employer) contributions are taxed at a rate of 46.5 per cent, which might not leave enough to fund an insurance premium either.
In the lead up to the legislation’s July 1 implementation, Tower Australia flagged this rule change as one of the most important issues facing clients.
“It’s quite a big issue, especially where people [have insurance] in an existing fund and their health isn’t that great. It’s not as if they can just go and get a new policy out, so they really need to take care of the policy they have,” Tower superannuation marketing specialist Carly O’Keefe said.
As such, the insurer embarked on a massive communication drive involving letters, phone calls and e-mails to clients to urge them to lodge their TFN.
ING Life Risk head of marketing and retail products Mark Vilo said ING adopted similar measures in contacting clients.
“From our perspective, we took a decision to get in touch with all the clients we had within our portfolios to make sure they were aware of the situation.”
While both insurers have reported good response levels, they said there was still a substantial number of people who had not provided a TFN.
Genesys Wealth Advisers authorised representative and member firm principal Michael MacQuillan was appalled to discover one of his clients, who has held an ING insurance policy for more than 20 years, faced this situation.
“I would have thought the Government could have looked at this in a little more sensible manner, after all, this is a problem of the Government’s making — it is not something that the life insurance industry created, nor is it something advisers should be responsible for,” he said.
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