Super insurance code a good start on reform, but more work needed to ensure fairness
20 September 2017
A draft Code of Practice for the superannuation and insurance industry released today has made good inroads towards reform, but work is still needed to ensure any final Code is fair and transparent, according to Maurice Blackburn Lawyers.
Maurice Blackburn Principal Kim Shaw welcomed that the Insurance in Superannuation Working Group’s (ISWG) draft Code had reinforced the need for default group insurance to remain through an opt-out system, but said any final Code must explain the real impacts of rationalising funds and policies to ensure fund members were not left worse off, as well as outline greater detail on ASIC enforceability.
“For years we have called for a binding code of practice for the industry that has teeth, and today’s draft Code has made a down payment towards the reforms needed,” Ms Shaw said.
“We welcome that today’s draft Code reinforces the critical value of default insurance within superannuation, and we also welcome the practical measures outlined to ensure that cover more appropriately supports the needs of young fund members.
“The proposal to cease a member’s cover after 13 months if no eligible contributions have been made is also welcome – this is a sensible step that protects the interests of new parents in particular who may have ceased making contributions whilst on maternity leave.
“However, we believe that any final Code must approach the failures of the system through the eyes of the consumer. It must fully explain how consumers will not be left worse off through any rationalising of funds and policies, as well as greater detail on what enforceability role ASIC will actually play in overseeing the process.
“The industry has suffered a significant loss of its social licence in the eyes of Australian consumers. While there has been some recognition of this, there must be a greater response in the final Code to ensure decline rates are transparent, as well as more detail about how the Code will relate to others who must play an ongoing role, including the legal profession.
“The final Code must also address issues around lengthy forms for members – for many of our clients fund forms are unnecessarily long and complex. Junk insurance clauses and inconsistent definitions we believe also will remain an issue for consumers under the current draft Code.
“We look forward to improvements being made to the Code that truly make it fairer, transparent and timely,” she said.