In an analysis of the life insurance market, the research house found that over 630,000 indiviudal SMSF members do not hold insurance, particularly in the Gen Y, X and baby boomer brackets.
Commenting on the findings, AFA chief executive Brad Fox told ifa the number of uninsured SMSF members is alarming.
“I think that the number is incredibly high and shows an enormous gap that needs to be addressed,” Mr Fox said.
“Part of the issue is that many trustees rely on an expert to assist them in their role as trustee and more often than not that expert is their accountant.”
“The accountant doesn’t have the authority to act as a financial adviser as well, [so] are they raising the issue of insurance sufficiently with these trustees, and if they are not, if they don’t feel it is their role how can we [make sure] that the trustee themselves receives information to ensure they have considered holding insurance,” he said.
Mr Fox also pointed out there is a significant opportunity for advisers to capitalise given the significant number of SMSF trustees that don’t have insurance.
“We shouldn’t assume that they would all need insurance, but if they did, that is nearly $1.7 billion of underinsurance and that is based on the average premium in Australia at the moment,” Mr Fox said.
“While it is a great opportunity, the real [concern] here is the personal situation of the self-managed super fund members. Have they taken a serious look at protecting themselves and their family and their assets,” he said.
Wayne Leggett…. really they don’t have a need for insurance. You cannot be serious! Most I meet with SMSF are also loaded with debt in there, so how is the fund going to release the money to beneficiaries!!Sell the asset that is the basis of their fund in the first place. Yes, great advice Mr. accountant and Mr. real-estate agent. And “Wondering”…. clearly there are many factors involved to counter your narrow views on why people don’t have enough insurance, but planners are not complaining that accountants are taking the income, and its not “mandated” to have insurance, only to review your need for insurance AND investment strategy.
Recently I read where the insurance industry wrote that a majority of Australians were chronically underinsured.
Now forgetting about SMSF’s for a minute, this damning indictment about low insurance levels reflects badly on financial planners & insurance specialists in the first instance.
Now that SMSF’s have taken off over the last few years particularly, why would anyone expect anything different about the level of insurance coverage within them?
To have people commenting here sheeting home the underinsurance problem in SMSF’s to accountants when the planning & insurance industry to date has failed abysmally to get Australians to take up adequate levels of insurance, is a bit rich.
Now that there appears to be a government mandated insurance gravy train to be milked by planners & insurers alike the wolves have come out and barked: Accountants get off my commission trail.
No wonder the industry has a real problem being perceived as professional and ethical.
[quote name=”Accountant adviser”]The issue is that most accountants don’t believe in insurance, they are advising clients to have SMSF when its not in their best interest. The accountant is not making sure the trustees adhere to laws requiring them to review insurance or their investments. The authorities are going to be very busy in future fining trustees due to this failure.[/quote]
This is also true of the property spruikers who are the other large drivers behind setting up SMSF’s.
@lord roxton. It does say “we shouldn’t assume they would all need insurance” inside their SMSF. This would cover those that are independently wealthy and don’t require insurance as well as those that hold the cover elsewhere. From my personal experience dealing with existing SMSF Trustees, at least half hadn’t recently reviewed their needs. Some were paying substantial premiums for cover they no longer needed and others didnt have any cover or were substantially underinsured.
I guess the underlying issue is you don’t know what you don’t know. Many trustees setup the fund with a focus on taking control of their investing and don’t realise there are other important factors to consider such as Estate Planning, anti-detriment, insurance needs of members and the fund, TTR pensions etc. Self managed does not have to be done on your own and seeking advice is an important part of being a prudent SMSF trustee.
The only thing that alarms me is that anyone would find this alarming. Given that, according to ATO September 2014 statistics, over 56% of SMSF members are aged over 55, and almost 82% are over 45, you would expect a low percentage would be insured. I also suspect that the research addressed insurance held within SMSFs only and made no allowance for cover held OUTSIDE the SMSF. Interesting perhaps; alarming?………hardly!
Please note the following:
Plan for Life senior marketing and research analyst Stephen Ryan-Gledhill confirmed this meant any kind of life insurance, regardless of whether it was held inside or outside an SMSF.
The above was in SMSF Adviser online http://www.smsfadviseronline.c…
I believe it has something to do with Accountants focusing on taxation matters and not looking at a clients Risk Insurance , which in my opinion is best left to people that deal with this as an occupation not a side issue !!
The issue is that most accountants don’t believe in insurance, they are advising clients to have SMSF when its not in their best interest. The accountant is not making sure the trustees adhere to laws requiring them to review insurance or their investments. The authorities are going to be very busy in future fining trustees due to this failure.
Mr Fox does not mention whether the question of life cover being held either in (say) an industry fund or out side super entirely was asked.
I suspect he has looked at only half the issue.