Formed late 2016, the Life Insurance in Superannuation Working Group (ISWG) was established to identify changes that can improve superannuation member value and protections. The Group's work priorities include:
1. reducing benefit erosion on superannuation account balances for members, including establishing the right level of automatic cover for young people and low-income earners
2. reducing inappropriate multiple insurance policies
3. providing better and more timely assistance to members during claims
4. improving superannuation fund member communications on insurance
5. improving data standards to improve service to members
6. undertaking independent research on the costs and benefits of group insurance within superannuation
Last week the ISWG released its first discussion paper, Account balance erosion due to insurance premiums. In the paper, the ISWG considered the key issues contributing to account balance erosion, in their simplest form are:
1. the premium amounts being charged
2. the impact of holding multiple automatic insurance policies
In the paper, some key principles were proposed by the working group, which include establishing the following:
- Design principles to determine automatic cover and affordable premium levels. These design principles would consider general conditions that apply to all members, the appropriateness and affordability of automatic insurance for younger members and members close to retirement, and affordability for all members.
- Overarching prescribed maximum premium levels for automatic insurance coverage.
- Industry standards for ceasing and re-commencing automatic cover.
- Formal protocols between insurers for the treatment of claims against multiple income protection policies.
- Industry standards for refunding premiums if benefits are reduced for claims made against multiple income protection policies. You can read the full paper here and submit your feedback to ISWG-PMO@kpmg.com.au no later than 7 April 2017. Two more discussion papers are due to be published in the coming weeks.
Industry and stakeholder feedback on the discussion papers will help shape an enforceable Code of Practice and Good Practice Guidance for Trustees, which is to be published by ISWG later this year.