SuperStream will overcome some complexity in the current system but it will remain a challenge to ensure all fund members get the right cover efficiently, according to Rice Warner’s latest research.
As SuperStream by itself does not force consolidation, it will not address the issue of multiple accounts. However, it is a move in the right direction, the life insurance report said.
“The changes will have a profound impact upon the risk insurance market. The key issue for trustees, insurers and reinsurers will be how to effect the consolidation of a member’s risk insurance within their chosen fund,” the report said.
“Whatever the final approach taken, we expect that insurers and reinsurers will need to relax some of the current constraints surrounding consolidation of insurance cover, particularly given the inevitable commercial pressure to ensure a smooth consolidation process with the insurer, and reinsurer, not being seen to inhibit it.”
In regards to the administration of risk insurance by superannuation funds, the report highlighted there are currently significant delays between the date some members join an employer and the date that the first contribution is posted to their superannuation account and insurance cover is acknowledged formally.
“Most insurers have indicated that they provide cover for all new employees meeting eligibility requirements irrespective of the date the relevant information is obtained and irrespective of which clearing house is used to process contributions,” the report said.
“This happens frequently at present, for example where insurers are provided with information on new insured members via a quarterly listing from the administrator.
“There is clearly a risk that, given the administrative delays often encountered, members will not be correctly advised of their default insurance cover on entering a fund and they or their dependants may therefore not be aware that they are able to claim in the event of death or disability.”
