Deadline for ‘opt-in’ insurance unachievable

Appearing before the Senate Economics Legislation Committee, APRA deputy chair Helen Rowell said the current start date for changes to insurance in default super will have “unintended consequences”.

The government announced in the 2018 federal budget that it would remove default life insurance for super members under 25, as well as putting a 3 per cent cap on fees for low account balances (below $6,000).

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Ms Rowell suggested that the fee cap was achievable by the government’s deadline of 1 July 2019, but she had grave doubts about the possibility of the insurance arrangements being changed by that time.

“To implement all of these proposals, funds will need to work closely with their administrators and insurers to ensure the required system changes and amendments to group insurance arrangements are in place,” Mr Rowell said.

“Insurance arrangements will need to be reviewed and repriced (taking into account actuarial input), underwriting processes reviewed and contractual arrangements renegotiated accordingly,” she said.

“These processes can be highly complex and time consuming for individual superannuation funds, and will be even more so when the industry as a whole is impacted.”

Super funds will also have to communicate the changes with their millions of members, she added.

APRA member Geoff Summerhayes said the 1 July 2019 deadline is “realistically unachievable”.

He noted that the super industry consists of 140 super funds, 22 insurers, 7 reinsurers and a number of administrators — all of whom would have to renegotiate contracts with one another.

“I note there have been submissions [to the Senate Economics Legislation Committee] recommending an additional year,” he said.

“APRA hasn’t put a timeframe forward but an additional year seems like a sensible idea, particularly when it comes to insurance.”