In a presentation in Sydney yesterday, ClearView managing director Simon Swanson pointed to data from the Australian Financial Complaints Authority that TPD, death benefits and income protection formed a significant number of the complaints regarding superannuation.
According to AFCA’s Annual Review 2018-19, regarding complaints about super by product, superannuation accounts received the most complaints with 1,680.
However, this was followed by TPD with 674 complaints, then death benefit with 364 complaints and income protection with 364 complaints.
“What I think you’re going to find is group life insurance is going to unravel slowly. I think in the year ending September, group life premiums in force are going down,” Mr Swanson said.
Mr Swanson cited two pieces of legislation that will dramatically change the group life insurance sector, namely the Protecting Your Super reforms that came into effect from July last year addressing erosion of super by fees and insurance costs, and the Putting Members Interests First reforms coming into effect on 1 April requiring people under 25 to opt into life insurance inside their super fund.
“The impact of that is that’s going to drive up the premiums for the older lives that are left in the group life scheme, which means that people will definitely need financial advice because the whole system is going to slowly break down,” he said.
Underemployed to be caught out on group claims, says Mr Swanson
Mr Swanson noted his concerns around the high level of underemployment in Australia, saying that 9.5 per cent of people would like to do more work, despite most of the focus on unemployment.
“A lot of these people obviously have superannuation accounts because they’re being paid. They also have term life insurance, TPD and income protection cover from group life inside superannuation,” Mr Swanson said.
“If you happen to be working under 15 hours a week, of course you can’t claim on your income protection inside superannuation, and there’s thousands, hundreds of thousands of people in this category.
“So if I deduct a premium from someone’s superannuation account for something they cannot claim on, I would put it to you that that is stealing.”
Further, Mr Swanson noted the outdated nature of current product design of life insurance inside super, which harks back to the early days of super and industry funds in the ’80s and ’90s.
“When super started and industry funds started, they were occupationally-based funds. People tended to stay in the same occupation. It was all OK. You could actually design products for that occupation,” he said.
“Roll forward to 2020 and suddenly they’re all public offer funds so you’re not sure who’s joining. I’ll give an example. In corporate super, the Telstra fund has more people who are not employees of Telstra than they do employees of Telstra.”
Very good points and very true.
Just more writing on the wall that the industry is….aah, how do you say it….STUFFED!
Will the regulators or the Government do anything other than continue making it near-impossible for advisers to actually do their jobs and earn an honest living though? Not on your life! They’re all too busy focusing on the windscreen scratches than the bigger picture and pandering to some old geezer’s recommendations from a biased Royal Commission.
If group and industry super insurance is beginning to also now unravel, then the end is nigh. The Titanic is full steam ahead, heading straight towards a rather large ice-cube! Can please please the lights off on their way out though?
Very true but thanks to Clearview and the other FSC members creating the LIF we can no longer afford to give advice and customers cannot afford it.
Oz Super are in it throwing their weight around. ! From April a new Ädministration fee – Protecting Your Super “will apply at up to 0.04% of balance PLUS the existing $2.25 per week ADMIN FEE. Still Not For Profit
Not for profit after the excessive admin and advertising costs then fees (Commission) for intrafund advice whether it’s used or not..