MLC Life Insurance has welcomed the government’s review of the Your Future, Your Super (YFYS) laws. However, the insurer is now urging the Treasury to investigate the impact of stapling on vulnerable people, particularly women.
Although its purpose is to reduce to the number of Australians with multiple superannuation accounts, stapling in practice requires members to be aware of the rules and take greater responsibility for decision making, resulting in greater consequences for those decisions.
Recent research conducted by MLC Life Insurance has revealed that 60 per cent of superannuation fund members were unaware of stapling, which could potentially leave them with inadequate or no life insurance protection when changing jobs.
According to MLC’s research, stapling will disproportionately impact vulnerable people, especially women, due to their life insurance cover being “switched off” if they leave the workforce for more than 16 months as a result of the Protecting Your Super reforms.
Furthermore, MLC claims that when someone attempts to re-join the workforce, they must take proactive steps to ensure they’re covered again or they will not have the same access to previous cover they once had because of stapling.
The percentage of women who engaged with their insurance is almost 10 per cent lower than men, with 37 per cent for women, and 46 per cent for men according to MLC’s research.
Chief group insurance officer, Mark Puli, said while the overall system of group insurance works for most Australians, there needs to be greater considerations for vulnerable people in regards to reforms such as stapling.
Mr Puli stated while the review of YFYS laws is a “positive development on many fronts,” the review terms “must include insurance coverage”.
“More than 70 per cent of Australians hold life insurance inside superannuation,” Mr Puli said.
“In 2021 alone, 45,000 claims worth $3.7 billion were admitted for life and TPD, providing cover for members or their beneficiaries when they needed it. The overwhelming majority of Australians value this cover.”
Mr Puli continued by saying that the most vulnerable Australians will “slip through the cracks” through the shift from an employer-led to a member-led system, further stating that their research revealed that “engagement remains an issue” with only 42 per cent of members ever reviewing their insurance.
It comes after the government announced a review of the YFYS laws and a pause of the test extension beyond MySuper products for 12 months earlier this month.
In a statement, minister for financial services Stephen Jones said the MySuper test will be reviewed to determine whether there have been any unintended consequences from the YFYS reforms.
“Funds must always be held accountable for their performance. In doing so, accountability mechanisms must not simultaneously create perverse or unintended outcomes for members,” Mr Jones said.
“The government is aware of concerns that the YFYS laws have the potential to create such outcomes by discouraging certain investment decisions or certain infrastructure investments.”