Insurers have warned about the “awful” results of the government’s insurance in superannuation reforms, saying it has not had enough time to warn people they will no longer be covered.
A key reform included cancelling life insurance policies through superannuation accounts that have been inactive for more than 16 months, in order to prevent consumers from paying premiums on policies they do not need, that then eat into their super balances.
At The Australian Financial Review’s banking and wealth summit, Brett Clark, TAL life insurance chief executive, said: “There’s going to be a lot of people after July 1 this year who go to make that call [to their superannuation fund] when something bad does happen to them or their families, and they’ll be told by their fund ‘sorry we cancelled your cover on July 1’,” SMH reported.
“We’ll do all those things that the law requires us to do, we'll do our best to help them, [but] there will be some people who will anticipate they still have that cover post July 1 and they won’t, and they’ll go to claim it and there won’t be any insurance there for them. There will be some awful stories that we’ll have to deal with,” Clark said, as he noted that up to 20% of superannuation accounts would be affected by the changes.
“The issue here is that's just going to happen automatically on July 1, which means millions of Australians will lose their cover, potentially not knowing they’ve lost that cover, overnight,” said Damien Mu, AIA Australia and New Zealand CEO.
Mu said AIA had still not yet written to affected members, roughly three months ahead of the July 1 deadline.
“The detail of the policy is still being developed, and then we need to work as an industry and with our superannuation funds to try get as much communication out there as possible,” Mu said.
The AIA boss said “having more time to do it” was the “appropriate answer” to the question of how to best serve the interests of Australians, SMH reported.
“We don’t have to do a lot in terms of the technical part of it,” Mu said. “It’s actually making sure that the communication is appropriate in allowing people to engage and be aware of this. It’s important to note that we’re not disagreeing with the policy position on this, we’re just thinking [of] how we ensure unintended consequences [don't] happen.”
Clark did not specify just how much time would be ideal to communicate effectively.
“The law is the law, and we’ve got to get it done by July 1,” Clark said. “We’re working hard to get it done.