The time frame to implement the federal budget’s proposal to change group insurance arrangements to opt-out for certain parties is too short and is likely to cause “chaos” in the industry, according to TAL.
Speaking on a panel at the FSC Summit 2018, TAL group chief executive Brett Clark said the volume of work that must be completed before 1 July 2019 in order to move super members under 25 years old or with balances under $6,000 to opt-in insurance arrangements is too much to do appropriately.
“The proposals as put forward in that time frame affect every superannuation fund, because pretty much every superannuation fund in the country has an insurance arrangement attached,” he said.
“Given the nature of the insurance pool’s changed so significantly, everything has to be repriced, not just repriced, but redesigned, discussed, worked through with the superannuation fund and communicated very carefully and thoughtfully, again and again and again.”
Additionally, Mr Clark said the administrative work that will have to be completed after the products and contracts are redesigned will put pressure on administrative functions.
“All the disclosure documents, and all the digital material around that needs to change, and this is for every insurance contract related to every superannuation fund in Australia, and then it has to be coded on the new administration systems, which largely fall to two organisations, Link and Mercer,” he said.
“You think about all that work funnelling down largely to two administrators for 1 July 2019, the operational risk involved in that, and the risk around member outcomes around that are enormous. I frankly think to stick to 1 July 2019 is reckless, and it could be chaos.”
In response to Mr Clark’s comments, APRA general manager Adrian Rees said the regulator is considering this potential problem.
“We certainly don’t want to see the kinds of scenarios that Brett described, it’s a very confusing situation and a very disorganised situation,” he said.
“We’ve urged that consideration be given to that.”
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