The value of group insurance needs to be clearly spelled out in the explanatory memorandum attaching to the objective of superannuation, according to the Association of Superannuation Funds of Australia (ASFA).
The ASFA has used a submission to Treasury to urge that the importance of group insurance not be overlooked as just an auxiliary benefit.
It said that to do otherwise, would fail to reflect the broader policy role that insurance in superannuation now fulfils in the community.
The ASFA has already made strong arguments to the Productivity Commission about the objective of insurance in superannuation on the basis that the “superannuation system provides insurance that delivers valuable protection to the community and meets members’ needs at reasonable cost”.
In its submission to the Treasury, it argues that the provision of group insurance is a crucial part of the system supporting Australians who suffer a health-related misfortune, resulting in absence from the workforce, which affects their ability to contribute to superannuation.
“The superannuation system enables members to manage the financial risks associated with ill-health and death during their working life whilst also supporting substantially improved retirement outcomes for claimants,” the submission said.
“In terms of social and economic benefits, these arrangements alleviate systemic underinsurance and the potentially devastating economic implications for individuals and their families who face disability or premature death. The lack of, or insufficient, insurance cover also adds to the call on the public purse through increased social security benefits. It is crucial that the system provides the right level of cover at a reasonable cost.”
