The largest issues around group insurance relate to superannuation guarantee funds that are run by industry superannuation groupings, according to a risk adviser.
In a submission to the parliamentary joint committee inquiry into the life insurance industry, Knight Management Services managing director Stephen Knight said super guarantee funds have a problem with regard to rising premiums.
“There appears to be significant number of inherent problems when it comes to funding premiums with a number of these funds, putting what could only be described as unreasonable rises in premium,” Mr Knight said.
“One of the largest funds in Australia, known as Australian Super, has had a 300 per cent increase in premiums over recent years.
“This appears that they had not costed the cover effectively, or have seen an unreasonable amount of death claims.”
Mr Knight also noted concerns relating to the types of cover offered and how they are structured.
“I have concerns that Australian citizens have been encouraged by a number of these funds to purchase income protection cover within these funds, which in my view, under the legislative guidelines, is madness,” he said.
“These funds in the past have not offered any advice. I know that that is improving, however I understand that is still to less than 1 per cent of their own client base.”
In a Risk Adviser blog, Innovus Advice Solutions managing director Paul Wright noted how industry super funds charge for advice but don’t disclose it in their publicity.
“Why do [industry funds] so blatantly devalue advice when, in many cases, they offer it themselves?” Mr Wright said. “They clearly know better, because many of them have in-house advice teams.”
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