Superannuation funds will be obliged to provide new members with an easily understood but detailed explanation of the funds’ insurance offerings, under proposals being pursued by the Insurance in Superannuation Working Group being headed by former TAL chief executive, Jim Minto.
Releasing its third discussion paper today, the working group has acknowledged that most of the available evidence showed most superannuation fund members simply did not understand the insurance offerings available from their funds and almost certainly did not read product disclosure statements (PDSs) because they were too lengthy or too complicated to understand.
It said the bottom line was that members risked potentially paying for multiple insurances.
“Insurance they may not need or may not be specifically appropriate to their needs”.
“In order to address these issues it is proposed that minimum standards are introduced to ensure that consistent information about insurance, including the impact of insurance cost on their account balance, is delivered to members upon joining a superannuation fund,” the discussion paper said.
It said the purpose of the insurance welcome kit would be to give members greater awareness, better information and ownership of the insurance cover they automatically receive through their superannuation fund.
The discussion paper then went on to outline the basics for such a welcome pack, including easily understood language, the inclusion of member-specific insurance information and “wording that highlights the risks and benefits of changing or opting out of insurance”.
The Insurance Superannuation Working Group is a combined exercise of the Financial Services Council (FSC), the Association of Superannuation Funds of Australia (ASFA) and the industry funds groupings, the Australian Institute of Superannuation Trustees (AIST), Industry Super Australia (ISA) and the Industry Funds Forum.