Insurance welcome pack for superannuation members
The Insurance and Superannuation Working Group (ISWG) has published a discussion paper among a series of papers regarding member communication and engagement relevant to insurance in superannuation. Of note is the recommendation for the development of a standard key fact sheet and the introduction of an insurance welcome pack for superannuation members. It should be acknowledged that communication by superannuation trustees and their insurers as to the nature and extent of insurance coverage provided through superannuation has been poor to date. The discussion paper is welcomed and the recommendations of ISWG, if implemented, will certainly improve member communication.
It has long been recognised that Australian workers are not engaged actively with their superannuation funds. Approximately two thirds of employees remain in a default fund, generally chosen by the employer, despite workers having the ability to choose their own superannuation fund since 2005. The reality is that member engagement is likely to remain low but certainly ISWG’s proposals to improve communication with members may improve knowledge of and engagement in insurance and superannuation.
Insurance and superannuation offers a cost effective solution to the inherent under insurance problem in Australia. When a worker is seriously injured or ill that impacts every aspect of their and their family’s life. Having lump sum TPD insurance benefit and in some cases temporary income protection benefits through superannuation is a very important benefit for superannuation fund members.
ISWG has recognised the need for consistent and simpler communications including the use of standard terminology which is particularly necessary given low member engagement. The use of complicated and long product disclosure statements and similar documents is not effective and has contributed to members’ disengagement.
A key point which ISWG does not make is the actual position of superannuation trustees and the limited assistance they can provide to members in pursuing insurance claims. The superannuation trustee has fiduciary obligations to the membership as a whole which are often times in conflict with the interests of an individual member. The superannuation trustee cannot be an advocate for its members and cannot provide independent advice in relation to a member’s rights under an insurance policy.
It must be recognised that there is a place for independent legal and financial advisors in the insurance and superannuation system both at the initial stages of membership and particularly at the time a claim is being contemplated. Members are entitled to and should be encouraged to seek independent legal advice in relation to their rights when it comes to insurance.