The LCCC’s Annual Industry Data and Compliance Report 2019-20 revealed that following the introduction of Protecting Your Super and the Putting Members’ Interests First laws, which cancelled a range of group insurance policies held by younger super fund members and those with inactive accounts, covers in force across the life industry had dropped 20 per cent from 40.9 million in 2018-19 to 32.6 million in 2019-20.
“Group cover was particularly affected by the new superannuation laws, and the industry experienced a 23 per cent reduction in covers during the year,” the report stated.
The report also found that the disruption of the COVID crisis had had a profound impact on insurers’ ability to process claims, with claim-related complaints rising 40 per cent year-on-year, and the majority of these relating to the time taken to process complaints. Code subscribers overall received around 900 more complaints than in the 2019 financial year.
“We acknowledge the operating challenges faced by Code subscribers during the reporting period, particularly the COVID-19 impacts during the last quarter, but we remind subscribers that the obligations built into the Code are especially important during difficult times,” LCCC chair Anne Brown said.
“The code guides subscribers’ decision-making towards outcomes that are fair, respectful, transparent and timely for all customers but particularly those who are vulnerable or may be experiencing financial hardship. In this context, demonstrated compliance with the code has never been more crucial.”
Around 75 per cent of all code breaches reported by insurers related to claims, compared to 41 per cent in the 2019 year. Code subscribers reported that 93 per cent of all isolated breaches were caused by people, with 34 per cent of these relating to human error and 32 per cent caused by staff failing to follow established procedures.
“We are concerned to note that some of the issues we flagged in last year’s report – such as the high number of isolated breaches of the code attributed to people-related causes – do not appear to have been addressed by all subscribers,” Ms Brown said.
“The committee knows that some subscribers have worked hard to improve their code competency frameworks, including their training, monitoring and breach correction processes. However, we also know that other subscribers need to improve in this area. We therefore urge all subscribers to conduct an analysis of their training, monitoring and breach correction processes to look beyond who or what caused the breach to find out why the breach occurred.”
this 20% decrease is a reflection of multiple duplications of insurance policies, and what was just straight out profit for the life companies. that is why they are squealing and highlighting this as if it is the governments fault.
Knowing a number of people who withdrew super amounts as a result of the pandemic, what they did was close all of their small multiple accounts derived from changing employers, so that they now have one superfund, into which their funds now go, and which has the correct amount of insurance cover for them.
Hence they have lost the multiple account fees and charges of having multiple superfunds as well as the duplicated insurance costs that occurred in all of the funds.
That seems like an eminently sensible decision to me, particulaalry when they now only have one fund which has the required level of insurance in it.
the better heading would be Memebrs benefit from Life insurance companies lose unnecessarily duplicated insurance member life policies. Now need to support themselves with proper pricing.
It appears you have no experience in the industry. You simply have no idea and have not witnessed great outcomes. Total rubbish
I wonder what a ‘cover’ is?
At 32.6m covers, there remains more covers than people in Australia. On the surface, that doesn’t feel like a good outcome. [But I don’t know if someone who has Life, TPD, GSC is counted as 1, 2 or 3 covers!}
These comments complaining make no sense. Life insurance is meant to enable you to settle your financial affairs if you die, so for example, your partner is not left with a whole mortgage to settle on their own. It’s not meant to be a payout. The reality is that for young people, most don’t have such financial liabilities and with pay rates so low, the fees are just sucking up any progress they are making on their accumulation funds. TPD does have a use, but a balance still needs to be struck between the fees and benefits and this needs to be the choice of the individual, not a default.
The issue I do concede is that losing 20% of the ‘pool’ means that my individual insurance fees will inevitably go up. But I don’t see why I should be subsidised by a group of people who are finding it increasingly difficult to get anywhere with their financial security. There is no argument that young people’s money is best invested in their own high growth super account.
Maybe you can volunteer to go talk to the parents and families of those people who WOULD HAVE insurance had it not been cancelled, who have since lost their sons and daughters and explain why there wasn’t any financial support or comfort available to help them during their grief.
Life insurance companies and advisers know the statistics around young people suffering premature deaths and permanent disabilities which is why advisers protested against this in the first place. I’ve personally lost 3 mates before 25 in my own life so I know this heartache happens.
Yet another dumb move by a Government I’d previously always supported that’s decimating an industry I’d once been so proud to work in.
No one dies prematurely. However, death can be untimely.
Since when has life insurance meant to be for providing windfalls or grief comfort to parents?
If the young person had debt or dependents they should have actively obtained enough life insurance to provide for those. (Default super insurance is never enough). If not, then they don’t need any life insurance. Life insurance should always be customised to the requirements of the individual.
I generally agree with you in relation to life insurance. TPD and income protection however are very different arguments which are lost politicians who refer to everything as “life insurance”. The loss of TPD cover in particular via this short sighted government legislation shows that politicians obviously work on the concept that no one gets disabled because their privileged life means they have never met anyone who has lost their house due to an illness. The alternative view is they are too stupid or ignorant to realise that TPD insurance exists, which is probable. Realistically the measure of a country is how we treat its most vulnerable and from my experience Australia fails this test.
Tis not good news for those who have subsequently suffered an injury or illness and were left stranded with no basic cover.
Good news until someone gets bad news they have a terminal illness and their partner will lose the family home because the insurance they had but did not ask for was cancelled and they saved a few dollars.
That 20% was the most profitable part of the group book, hence the strong price increases of group cover. Once more people understand how to qualify for non-underwritten cover, this whole market may implode.
Tis good news all those people who never asked for, or wanted, insurance in the first place now no longer have it.
Cold comfort for those who needed it and lost it.
Yep…until they need to claim and thought they had cover…
until they need it
What a ridiculous comment. It’s all fun and games until someone loses an eye… 🙄
No longer have it …..until they need it. Then they will wish they had it.
Most people don’t WANT insurance. It’s a grudge purchase….just like buying tyres for your car. But when the wheels fall off in your life, that’s when you wish you actually still had those tyres. Want it or not, having some group cover is better than none at all. I have seen families lose their family home’s because they “never asked for, or wanted, insurance”. Time to get real “Realist”.
Over time this will also hopefully remove the lack of care many people have about getting properly insured, “because my super covers it”.
Many people would be far better off having zero insurance in super and being prompted to do something about it, rather than having an inadequate default amount and a false sense of security.
Derr… you sound like a public servant. Let’s just jack up the cost of cover for everyone else and let the taxpayers pick up the health costs when they get sick.
Ideology is what is killing this industry.
You could not be that stupid.
I’ve had two phone calls in the past 6 months from people who are terminally ill and have insurance cancelled. At least one is losing their house.