Industry pushes back on insurance inside super
The Federal Government is facing significant push-back from both the superannuation and insurance industries over its Budget announcement allowing low balance holders under 25 to opt out of insurance inside superannuation.
Virtually all elements of the superannuation industry have warned that the Budget measure comes at the risk of leaving a significant cohort of younger workers under-insured, while the Financial Planning Association (FPA) has suggested that opting out of insurance inside superannuation should not occur without people being given the opportunity to access advice.
Deloitte head of superannuation, Russell Mason set the tone of the superannuation industry concerns when he said there was a risk that a lot of people would become unintentionally uninsured.
“Younger members with dependents may well become inadvertently uninsured,” he said.
The Association of Superannuation Funds of Australia (ASFA) also expressed concern, noting the Budget measure could be particularly dangerous for those in high-risk occupations.
ASFA chief executive, Dr Martin Fahy said the Budget shift to an opt-in model would put insurance coverage at risk for many young people who had dependents and financial commitments.
The Financial Services Council (FSC) chief executive, Sally Loane also warned that the policy shift could see younger Australians slipping through the safety net.
“It will be incumbent on superannuation fund trustees, particularly those in the default system, to engage and communicate more effectively with their under-25-year-old members to ensure they understand the implications of the policy change,” she said.
Even before the Budget had been handed down, specialist lawyer, Paul Watson said that while he welcomed reports the Government intended to legislate to make insurance in super opt-in for people under 25, he was concerned that disability insurance cover was also being removed.
He said that death insurance had historically been poorly targeted for under 25s because they did not usually have financial dependents or mortgages, but they did suffer from disabilities and injuries which could prevent them from working.
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