Close to four months have passed since the Cooper review submitted its recommendations to the federal government after undertaking a detailed assessment of Australia’s superannuation system.
When the review was announced there were concerns initially expressed about the implications for and future of group insurance within the superannuation industry.
However, after reading the recommendations, particularly those pertaining to insurance, it was pleasing to see the panel understood the importance of the continuing role for insurance within the superannuation system.
While it’s clear insurance within superannuation is here to stay, there are number of other recommendations relating to insurance that we feel will progress as further industry consultation and debates occur.
No doubt if insurance was removed from superannuation it would have left Australians faced with significant social, economic and financial risks into the future.
With the new Labor government winning a mandate to govern for the next three years, albeit on a minority basis, we positively await its response to which recommendations will be adopted and the time frames for their implementation.
While change is inevitable and a key part of driving continual improvement, we believe it is imperative the industry actively engages with government to push for the life insurance-specific recommendations to be further explored before decisions are made, given the potential implications.
If we are serious about the importance of life insurance to Australians, we need to ensure we are engaging the government to help understand the social and economic cost of underinsurance and the importance of personal financial protection before critical decisions are made.
Too often we look back in hindsight, pondering what could have been if only…
At AIA Australia we believe there are some very positive recommendations with respect to life insurance that should be at the heart of those discussions and others that require close examination of the full impact before change is made.
Whatever the outcomes, our role will be to assist our partners to implement change as efficiently and seamlessly as possible.
The importance of maximising the retirement incomes of Australians should not be discussed in isolation of the need to adequately protect Australians and their families from unexpected events.
The Financial Services Council, life insurers and other key industry stakeholders have opened discussions, but we feel there needs to be a push for government to incentivise individuals to take up additional insurance cover.
A main priority needs to be for everyday Australians to be able to easily access adequate life insurance cover, at an affordable cost and make it simple to understand.
We must work together to change the public perception that life insurance is expensive and difficult to obtain and the government and industry have a major role to play to combat and debunk these common perceptions.
In addition, life insurers need to take up the challenge to find ways to simplify products and continually improve services to generate a better value proposition to customers.
As a life insurer, we embrace regulatory change that allows the industry to operate more efficiently and deliver more value to the customer and also increases the penetration of financial protection in the Australian community.
We would also push the importance of easing the burden on taxpayers from filling the void to support families that have lost their primary income.
Rice Warner Actuaries predicts underinsurance currently costs Australian taxpayers more than $250 million a year, and Australians remain underinsured by a staggering $1.37 trillion.
It is in the best interests of the community to reduce the impact and future risk on public expenditure.
We also need to seek clarification and thoroughly debate and explore the thoughts to ban commissions on group risk products.
It is not a question of commission verses fee. It should be an issue of funding of costs for provision of genuine service.
We support that group insurers pay legitimate costs incurred by super funds in developing, administering, servicing and promoting group risk benefits to their members.
If the ability to pay these legitimate costs is removed, it would undermine the viability of group insurance and would be incongruous with Cooper’s general acceptance of the importance of trustees’ rights to provide such benefits to their members.
It follows that if a trustee has this right, then they must be able to fund the service and infrastructure costs associated with it.
Almost one-third of Australian life insurance policies are accessed through superannuation funds, according to data from market researcher Plan for Life.
Continuing to support superannuation funds to provide insurance benefits is critical in light of the underinsurance issue.
Further investment in education and promotion of these benefits needs to continue and be supported by the industry and government.
We see this as a critically important function in supporting our partners, which in turn support everyday Australians’ overall financial plans.
