PYS changes already impacting claims
Industry superannuation fund, Hostplus has already turned down seven life insurance claims from members who were unaware of Protect Your Super (PYS) changes that would opt out members under 25 and those with balances of less than $6,000.
Speaking on a panel at the Association of Superannuation Funds of Australia (ASFA) conference on Thursday, the fund’s head of insurance, Shane Fielding, said the of the claims five were terminal illness claims and two death claims.
These members were automatically opted out of life insurance in their super due to PYS changes on 1 July, 2019, as they did not notify Hostplus to opt them in.
“That’s just the tip of the iceberg. There will be total and permanent disablement [TPD] claims down the track in months or years that relate to this period where we’ve cancelled people’s cover,” Fielding said.
“We won’t know until we get those claims in and we’ll have to tell them that their cover is cancelled.”
Fielding noted that younger super members did in fact make insurance claims and over the last five years Hostplus had paid out 300 claims totalling $34 million to members under 25 years.
“In that next age bracket there were 900 claims that totalled $195 million for members aged 25 to 34,” he said.
“Getting younger members to make a decision about their insurance is critical because they do claim.
“A lot of those younger members are claiming TPD for mental illness conditions that they are getting paid for. They’ll never be able to work for the rest of their life and that insurance is a critical part of their future.”
Fielding noted that only 20% opted into life insurance before the PYS changes and most were older members.
Fielding pointed to his fund’s research that found younger members had the perception that insurers only paid out 50% of claims and that it was important for this age group to trust the life insurance industry.
Fielding said his fund’s research found younger members would have been more engaged if member communications were “loud” and “early”.
When asked how that could be reconciled with the regulator’s guideline that said communications needed to be “neutral”, Fielding said it was difficult to reconcile the two but it was an opportunity to educate the regulators on younger members and then help guide future approaches.
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