Over the course of many years, we have become increasingly concerned with the quality of insurance cover issued by superannuation funds, as the Trustees of many large funds have changed the policy wording and definitions of key terms to the significant detriment of their members.
Unlike retail (advised) clients, many employer or group member policies held within superannuation funds are not guaranteed to be renewable (meaning that policy changes can be made post-policy inception). Disappointingly, we have seen Trustees sign off on changes that are very much to their members’ detriment. The great concern with these post-policy changes is that members are either unaware their legitimate claims no longer satisfy the payout wording, or are aware, but possess health conditions that prevent them from switching to a better policy elsewhere.
These detrimental actions have been highlighted in the news most recently, including:
- On 7 September ASIC’s report on the provision of insurance cover through superannuation described Trustees that automatically identified members as ‘smokers’ or ‘blue collar working’ by default when transferring them from Employer Plans to Personal Plans ¹.
- The Sydney Morning Herald on 2 September reported an adverse change to an Income Protection and TPD offset clause for Qantas pilots, which was unable to be found in the original Product Disclosure Statement ².
- The Australian Financial Review on 9 September reported that casual workers with a particular superannuation insurance policy faced "draconian requirements that most TPD cases could not ever meet" ³.
We have always believed in, and recognised, the superior value and quality of retail policies in comparison to group and superannuation policies (due to the more appropriate policy wording, guaranteed renewable definitions, and the portability of cover). However, group and superannuation policies are often seen to be priced more competitively. In recent years, this has been less often the case, and in our view, is unlikely to change should TAL and AIA’s suggestion of premium increases of up to 26 percent eventuate in line with the Productivity Commission’s recommendations³.
In summary, the risk of holding inferior insurance policies that may leave you and your family disappointed in the event of a claim are too great. If you have an existing insurance policy within your current superannuation fund, we would be happy to review this for you and advise you on the appropriateness of the coverage for your circumstances.
Copyright © 2018. The information provided is not personal advice. It does not take into account the investment objectives, financial situations or needs of any particular investor and should not be relied upon as advice. While the information is provided in good faith and believed to be accurate and reliable at the date of preparation, we will not be held liable for any losses arising from reliance thereon. We recommend investors consult their personal financial adviser to discuss suitability and application to their individual circumstances. Advisors at Pitcher Partners Sydney Wealth Management are authorised representatives of Pitcher Partners Sydney Wealth Management Pty Ltd, AFS & Credit Licence number 336950.