The Federal Government has directly canvassed lifting the default level of insurance cover included in MySuper products, including with respect to Total and Permanent Disability (TPD) insurance.
In an issues paper issued to the industry this week, the Treasurer, Josh Frydenberg, has sought to portray as a response to the recommendations of the Royal commission and has canvassed lifting default levels of insurance alongside legislating universal key terms, definitions and exclusions.
The issues paper has also canvassed the fact that some industry stakeholders have called for changes to the Superannuation Industry (Supervision) Regulations to specifically allow for insurance payouts to cover the cost of early intervention measures to facilitate members return to work.
On the question of raising default levels of insurance cover, the issues paper notes that the Superannuation Guarantee (Administration) Regulations already require minimum levels of death cover for MySuper members but noted that the Royal Commission had suggested whether these minimum requirements should be increased.
“Increasing these thresholds and/or extending the minimum requirements to TPD insurance as well as death could set a signpost for trustees in terms of the minimum expected level of cover and provide members with a level of certainty around the level of cover they will receive in a MySuper product,” the issues paper said.
“At the same time, an increased minimum level of cover would not prevent trustees from setting a level of default cover in excess of a minimum level, and trustees would still be bound by their obligations to act in the best interests of their members when determining the level of default cover offering within their MySuper product, meaning this alone will not act as a guarantee of standardised cover for MySuper products,” it said.