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Are some new insurance definitions ‘junk’?
Efforts by superannuation funds and their insurers to contain exposures to losses have resulted in some insurance definitions which are tending towards the "junk insurance level", according to evidence given to the final public hearing of a Senate Inquiry.
The final day of public hearings of the Senate Economics Committee Scrutiny of Financial Advice Inquiry was told by Sydney solicitor and insurance specialist, John Berrill, that the adverse claims experience by superannuation funds and their insurance which had followed the global financial crisis (GFC) had given rise to changes.
"Their response to what they say is an adverse claims experience in the last couple of years has been to change TPD [total and permanent disability] definitions, for example, within superannuation, which is problematic," he said.
"There are a couple of those definitions within super funds that are tending towards a junk insurance level. It is a problem that needs looking at."
Berrill told the committee that what had happened represented a "perfect storm" in which a variety of issues which had existed separately in the industry had been brought together.
"It highlights the need for change, for updating," he said.
The Senate Scrutiny of Financial Advice inquiry lapsed with the calling of the Federal Election.
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