Ms O’Dwyer said that insurance in super is an area in which she receives many letters from her own constituents as well as those of her colleagues in parliament.
“It is fair to say there is a lot of confusion about how this part of the industry works,” Ms O’Dwyer said at the ASFA Conference last week.
“Especially among younger people who find their balance has been eroded by insurance premiums they didn’t realise they were paying.”
Ms O’Dwyer said she understands from APRA that some super funds have been slow to tackle the issue through the implementation of appropriate policies and changes to insurance arrangements.
“Trustees have an obligation to balance the offering of insurance inside superannuation with the potential erosion of member balances,” she said.
“It is critical that this important part of the system is consistent with the overall objective of superannuation and is fit for the future.”
Former ASFA chairman Jim Minto also spoke at the conference, saying it is important industry communicates effectively with members so that they understand the necessary trade-off between affordability and restrictive terms.
For once Kelly O’Dwyer is absolutely on the money. I’m sick of seeing the account balances of low income earners, eroded away by insurance premiums they didn’t agree to. It is immoral. If the super fund wants to earn a commission (or other profit) from the policy, then they should bloody well talk to the member and ask them if they want the cover. Heck, maybe they could even give them advice. But don’t take money from someone without asking permission. That is theft! There is no other word for it. If I operated like that as a financial planner, I would be banned for life!
Of course the younger they will write and complain.. ask young people what they think about paying tax to subsidize older families. no one wants to pay for insurance until they need it.
I’m assuming Kelly is therefore suggesting people get personal advice to ensure they have adequate insurance cover whilst still saving for retirement? hi
This is why education around workplace superannuation is so important. Many people don’t understand the importance of insurance in superannuation, and it’s often not fully appreciated until they or someone they know makes a claim.
The concern around erosion of superannuation benefits needs to be offset by the concern of under-insurance, which is a big issue. Without default cover in super many people would have no cover at all and there would be more stress on the public purse.