The Government would be wrong to move to remove life insurance from being a core offering within superannuation, according to the Actuaries Institute.
The Institute used its pre-Budget submission to the Treasury to argue that life insurance within superannuation plays a vital role and actually generates cost-savings to the Government.
Echoing arguments it recently put to the Productivity Commission, the Institute noted that Australia’s life insurance penetration rates were amongst the highest in the world because of its distribution through the superannuation channel.
However, it said despite this, there was still an underinsurance gap and that the superannuation system ensured that all working lives received a basic level of cover, and developments in technology would allow for this to be increasingly tailored to individuals’ needs.
The submission said that calls for removal of the current levels of [insurance] coverage would remove coverage for millions of Australians and place an increased burden on government, primarily through increased social security payments.
Addressing suggestions that removing insurance from super would generate cost savings, the Institute said it was important to remember that almost all the existing legal infrastructure/costs of evaluating disability and identifying and paying dependents would need to remain in place.
It said this was because accumulated savings would still need to be distributed in the event of death and disability.
“Insurance in super efficiently utilises these existing processes to provide greater benefits to members,” it said.
