The Insurance in Superannuation Working Group, headed by former TAL chief executive Jim Minto, delivered its Insurance in Superannuation Voluntary Code of Practice for superannuation trustees.
The working group code of conduct, which is backed jointly by retail and industry super funds, was immediately dismissed by consumer group CHOICE as "unenforceable" and a "dud".
"CHOICE spent the last year consulting with industry on a code which would have lifted the bar for consumers. The code would have responded to the poor claims experiences and erosion of retirement savings caused by inappropriate insurance and restrictive definitions," said CHOICE.
"Instead, at the 11th hour we’ve seen life insurers let their self-interest run rampant, creating a dud code that we cannot get behind."
Revenue and Financial Services Minister Kelly O'Dywer said in a statement to InvestorDaily she was considering an "appropriate regulatory response" to the voluntary code.
"The government is concerned that the superannuation industry has walked away from a commitment to a more robust, mandatory code of practice that had been the subject of earlier consultation," Ms O'Dwyer said.
"Australians should not be sacrificing their superannuation contributions and earnings for insurance they do not need or cannot claim on.
"This is particularly important for members with low account balances as well as people with multiple accounts, especially young people who in some cases see all their super contributions eaten up by unnecessary insurance fees.
"The government will consider an appropriate regulatory response in light of the industry's position," Ms O'Dwyer said.
Former NSW Liberal leader Kerry Chikarovski said in August 2017 that there are "people sitting on both sides of [politics] who actually think that insurance within super is a complete rip-off".
Releasing its code, the working group said, "The code is voluntary and ISWG expects there will be strong support for trustees to sign up to it.
"It is a strong step towards enhancing member interests and helping build confidence in and understanding of life insurance through superannuation."
The code is set to come into effect from 1 July 2018.
