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Greater clarity needed on premium erosion
Superannuation funds need to do more about informing their members about the circumstances under which their account balances are being eroded by insurance premiums.
The Joint Parliamentary Committee inquiry into the life insurance industry has been told by specialist lawyer, John Berrill, that the erosion of premiums represents a significant problem, albeit that some superannuation funds handle the matter better than others.
Under questioning from Queensland Liberal Party parliamentarian, Bert van Manen, Berrill cited building industry fund, Cbus, as an example of a fund which handled the issue better than other funds.
“…Cbus has actually a very sophisticated process by which they tell people that their account balance is about to fall below the threshold and that their insurance cover will soon cut out, so if they want to do something about it they have to make a contribution,” he said.
Berrill said that what was needed were strict rules requiring funds to follow protocols.
He said those protocols should relate to informing people about “what the level of cover is for a continuing account base cover, when that cover will cut out and informing people of it”.
Berrill said there was no problem with people starting a job, joining a superannuation fund, and having their employer pay the first contribution.
“That is life cover. There is no problem with that. It is when the contributions stop going into the fund, so the insurance stops being deducted and then they go to the account balance. If the account balance falls below the threshold, the insurance cuts out. But people are not being told and the premiums are still being deducted. That is a problem that needs fixing and we need strict rules around that,” he said.
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The Joint Parliamentary Committee is belting the industry senseless. Investigations and Senate enquiries seemingly go on forever without stopping to think logically. We there is a problem with financial literacy which is not isolated within Australia. What is the point of this exercise? If individuals are too lazy to read or take interest in their annual superannuation reports, why is it the providers' fault? I have never had a complaint when a claim has been paid to a recipient or a beneficiary.