The Financial Services Council (FSC) has announced that it will prohibit the use of exclusions and restrictive disability definitions because a member is employed in a high-risk occupation.
The peak body confirmed that the ruling will apply to all default group life insurance in superannuation among FSC super and insurance members.
The FSC said the move comes on the back of government’s Your Future, Your Super bill in regard to stapling.
“Recognising that under the new stapling regime some consumers may be unable to claim on life insurance cover because their fund has occupational exclusions in its default group life insurance, the FSC initiated a process to achieve structural change to better protect consumers,” a statement released this week reads.
However, the FSC has said it will not prevent trustees from choosing not to offer cover to a new member based on their occupation when they join the fund. In this case, the member would not be charged insurance premiums.
The ban is scheduled to come into effect from 1 January 2023 pending further consultation with regulators including the ACCC.
The news comes as the FSC released a new paper this week with a proposed framework that it says could reduce the cost of financial advice by almost 40 per cent.
The paper recommends raising the threshold under which clients are identified as retail clients with those with assets of less than $5 million, abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.
KPMG’s analysis of the FSC’s recommendations found that the cost of providing financial advice would be reduced from $5,334 to $3,466, would save advisers up to 32 per cent of time when dealing with clients and allow them to provide advice to an additional 44 new clients each year.
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