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Australia: Further actions required by industry and govt on insurance in super

Source: Asia Insurance Review | Feb 2019

The prospects of recent insurance-specific initiatives to address the deficiencies of insurance arrangements in superannuation are limited, noted the Productivity Commission.
 
In its report entitled ‘Superannuation: Assessing Efficiency and Competitiveness’, the commission said that further concerted action is required by both industry and government. This includes efforts by industry to adopt and improve on the code of practice, complementary action by government and regulators to drive code adoption, and other actions by government to mitigate adverse outcomes from current insurance in superannuation arrangements.
 
Some of the issues highlighted in the report are:
  • Account balance erosion
  • Unintended multiple policies
  • Policies not value for money
 
The report adds that proactive and pre-emptive actions to self-regulate can address concerns in a more efficient and less burdensome manner than through government regulation. There are two broad areas where funds need to focus attention to increase the value of insurance to members.
  • There is scope for funds to improve benefit design, including better tailoring of insurance products to meet the needs of different cohorts and ensuring members are not allocated to unsuitable products or charged on the basis of inappropriate risk ratings, while ensuring that full consideration is given to the effect of insurance premiums on account balance erosion. It is apparent that there is scope to use available data to do this better, with funds able to impute the likely characteristics of their own membership from generic data sources.
  • Funds can improve engagement with members, including ensuring members are aware of their insurance cover and making it easier to opt out, amend cover, elect to retain cover where it might otherwise be cancelled (such as when they go on extended leave) or make claims. A 
 
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