There were a number of sound recommendations coming out of the super system review that were founded on solid industry consultation.
In some respects it seems insurance was just a bit too hard for the review panel to tackle, with a number of important considerations that were put forward seemingly ignored.
The insurance commentary, in general, gave a fairly strong indication that there had been little, if any, input or oversight by anyone with serious group insurance experience.
A statement such as the one that lump sum total and permanent disability benefits are offset by workers’ or accident compensation, sick leave and centrelink benefits, when it is in fact income protection benefit payments that are offset by such payments, makes one question the rigor with which the insurance component of the review was tackled.
Disappointingly, while there were a number of references to newspaper commentary made in the month prior to the release of the review’s final report, there was not one reference to any submission from group insurance specialists, insurers or reinsurers, all of whom are tackling group insurance issues first-hand on a daily basis.
Unfortunately, the fact insurance premiums, which increase rapidly with age, are included in the maximum superannuation contribution amounts, further impacting on members’ ability to fund their own retirements, went unacknowledged.
Also, earlier concerns about the aptly dubbed ‘flipping’ have vanished from the final report.
The argument for this practice is that it means members retain cover when they leave their employer. However, people who move between jobs can be oblivious to the fact insurance premiums continue to be deducted from their accounts – particularly younger members who often have low balances.
It would be pleasing to see some further consideration given to each of these issues, at the very least.
Regardless of the final outcome of the election, and whether or not any of the recommendations of the final report are legislated, it is highly likely the regulators will be seeking assurances that trustees have a well-formulated and documented insurance strategy.
While many funds will already have such a strategy in place, trustees would be well advised to review their fund’s underlying insurance policy now.
The insurance policy is integral to the sound management of a group insurance program, and while it comes into focus in the early stages of a revised insurance arrangement, it can very quickly fade into the background.
This can often result in insurance policies not being finalised and/or signed, as well as a mismatch between the terms and conditions specified in the policy documents and member communications, including, but not limited to, product disclosure statements and annual benefit statements.
A not uncommon shortfall is the administrator’s ability to administer the insurance policy rules, such as when cover starts, stops and restarts.
As we see increasing levels of default cover, so will we see all roads leading back to the insurance policy, in the event of a disputed claim.
