As 1 July quickly approaches, the Consumer Action Law Centre (CALC) has warned superannuation members with inactive accounts that this is their last week to preserve their insurance inside superannuation cover ahead of the Government’s Protecting Your Super reforms kicking into force next month.
From next Monday, funds would cancel the insurance on accounts that hadn’t received any contributions for at least 16 months unless the member elects to continue the cover to preserve account balances from erosion by premiums.
While super funds had been contacting member in this situation, there were concerns in the industry that poor member engagement with communications from funds could lead to members losing cover unbeknownst to them. This could also lead to legal actions against funds, the Government, or insurers.
While CALC chief executive, Gerard Brody, acknowledged that some people, especially those who were young and healthy, mightn’t need to retain insurance, insurance in super offered a cost-effective way of obtaining life cover for many. He urged these people to alert their funds.
According to Financial Counselling Australia chief executive, Fiona Guthrie, those losing out on cover unintentionally could be amongst the most vulnerable super fund members.
“The changes could detrimentally impact people who could benefit from insurance in super, but haven’t read, understood or even received a notice about an inactive account and will therefore not make an informed choice to keep it,” she said.
“These potentially include people who are caring for children, people in the gig economy, people with chronic illnesses and indigenous communities.”
The Australian Institute of Superannuation Trustees (AIST) today also reiterated its calls for members to check if they were losing their cover, with a spokesperson, Alisa Goodwin, saying “if you have received a letter or email from your super fund, make sure you read it”.