Life insurer ClearView has warned the recommendations made by a superannuation industry lobby group would not be suitable for the industry.
In a submission to the Productivity Commission’s inquiry into insurance in superannuation, the company expressed concerns over a discussion paper and draft code of practice issued by the Insurance in Superannuation Working Group (a body representing ASFA, AIST, FSC, ISA and IFF).
ClearView said that ISWG was “determined to proceed” with two individual life codes, the ISWG Code and the FSC Life Insurance Code of Practice, with the possibility of merging the two separate codes in the future.
“We consider that this approach is a significant mistake,” the company said.
The company gave four reasons this system would be impractical: it reinforces the inaccurate view that group insurance is exempted from the FSC Code, trustees will not be able to meet ISWG Code standards without co-operation from insurers who aren’t bound to the same code, the ISWG code doesn’t address the client-insurer relationship regarding claims, and the idea of merging the two codes is “fanciful”.
The submission also notes that ISWG’s draft code has adopted the current opt out model for insurance within superannuation and has done so “without robust debate or consideration”.
“ClearView considers that the current industry practices in opt out (fixed cover) arrangements for group insurance in superannuation are a major contributor to poor personal and financial outcomes for many Australians,” the submission said.
“The opt in model would prevent these poor outcomes because both the life insurer and the trustee would need to deal with each member to offer appropriately priced insurance with a range of benefits which were suitable for the individual member.
“We would respectfully request that the Productivity Commission considers a ‘back to basics’ approach regarding what role superannuation should have in both providing and funding life insurance premiums.”
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