In its submission to the life insurance inquiry, ClearView said the current ‘opt-out’ model discourages clients from properly assessing their insurance needs and regularly reviewing their arrangements.
It said a system requiring members to consciously opt-in for group insurance in super “will result in a substantial improvement in understanding what they are, and are not, covered for and how much cover they have”.
“This will significantly reduce the number of workers who think they, and their loved ones, are adequately protected when they’re not,” ClearView said.
“Importantly, it will lead to more workers seeking advice, either via their super fund or a third party, about the type, and level, of cover they need.”
However, insurers TAL and MLC opposed ‘opt-in’, instead indicating support for the current ‘opt out’ model in their submissions.
MLC said that if group cover were shifted to an ‘opt-in’ basis, thereby altering the size and risk profile of the insured population, anti-selection risk would likely increase, leading to an increase in overall risk for insurers.
“This scenario brings with it negative cost implications for all customers, and could potentially cause some people to be unable to access insurance at all – for example if they have a poor health record,” MLC said.
TAL argued that group insurance relies on broad community participation, and that the ‘opt-out’ model “is central to its efficiency and effectiveness”.
“Without ‘opt-out’, the group life insurance model will fail to function, premiums will increase substantially and many people will not be provided life insurance at all through this or any other channel,” TAL said.
opt in will break the group insurance model, rates will increase, underwriting will increase and fewer people will be insured. Government welfare costs will increase. Something is better than nothing. Levels of cover and rates are based on general needs, i.e. older people need less cover as usually their debts are paid etc. Group insurance isn’t perfect and more work needs to be done on member awareness, but this is improving all the time. There are also some issues to resolve around members not knowing if their eligible for cover, sometimes they’re not, but still paying premiums. But these cases are the minority.
Why do articles keep sharing Clearview’s unclear view on this. They are a direct and retail life insurance business only with no Group function. By pushing for opt in, they are exacerbating the under insurance problem in Australia. It has been noted that TAL and MLC have a Group function, but the article has ignored the crucial point that the demise of Group would see Clearview’s share price rocket.
What a disgraceful stance from TAL and MLC. In other words we want to take money from clients without their knowledge or approval and reduce their retirement funds without approval and we want to be able to increase premiums at will. Isn’t taking money without someone’s approval actually theft???
What utter nonsense from MLC and TAL. If you are going to make a profit from taking money out of someone’s super fund, the very least you can do is ask for permission. Where is the moral compass in these organisations? All it takes is a phone call. eg. “You have been automatically approved for X insurance cover and the cost is Y per year, are you happy to go ahead?”. I’m sick of seeing account balances eroded away by insurances that were never agreed to.
Ben clearly you have never influence anyone to take out insurance …….. Group cover is not perfect, but something is better than nothing
Group auto covers can be a great deal for some people. Both sides have good points, but unfortunately uneducated/ignorant people will just say no to insurance cover as it is seen by many as an unnecessary expense. The same people who will get upset when they find they have no cover when needed, and someone at the BBQ on the weekend told them they probably have insurance in their super.
At the other end people who change jobs in their 50s and 60s can get auto covers costing $5k a year which they are ignorant to as well.
Financial education needs to improve before people can reasonably make an semi conscious decision for no insurance, perhaps why mysuper legislation mandates some basic insurance cover?[c[size=20px][/size]olor=olive][/color]