Strong warning on insurance in superannuation
There is a genuine risk of superannuation fund members being severely disadvantaged with respect to their insurance cover as a result of the proposed auto-consolidation processes being pursued by the Government as part of its Stronger Super approach.
That is the bottom line of a roundtable of superannuation fund executives, insurers and administrators conducted by Money Management's sister publication, Super Review, with administrators describing the changes as a "minefield" while some of the fund executives suggested the Government should consider delaying the implementation.
Australian Administration Services head of product Peter Johnson said that for administrators "it's going to be a real minefield".
"I think we are concerned about the risk of people losing their insurance," he said.
"Have they got insurance as they move? - and there's the delays going through the process, and in the end the insurer's going to be concerned about selection, and being paid and things like that.
"So we've got a lot of insurance cover that's employment-based, it's account-based and [the clients] move and then you merge funds," Johnson said.
"For us it is a real concern as to how you are going to make sure that people don't lose - because it's looks like from where we sit a lot of members are going to finish up losing their insurance as an unintended consequence."
FuturePlus general manager, operations, Hayden King supported Johnson's concern and warned that the Government and the industry could not simply start from the premise that people held multiple super accounts - and therefore multiple group insurance cover - because they were lazy.
"I think the first thing is, we can't just start with a premise that people who have more than one account are lazy," he said.
"I mean, yes, there's a majority that disengage, but I think we need to first of all just have a process of working out who's legitimately got more than one account.
"This is all to be done in the best interest of members. We shouldn't just say that for the "greater good" we're going to consolidate everyone: it's what's in the best interest of members, it's real money that belongs to other people, we can't lose sight of that," King said.
The full transcript of the roundtable has been published in the January edition of Super Review.
