Sunday, January 06, 2013

Confusion Over Insurance for Superannuation Members

Australian Ethical Investment (AEI) is informing its superannuation members that legislation requires them to provide members with with Death & TPD insurance on an opt-out basis. AEI will sign up the members for insurance and deduct the premium from their superannuation account, unless the member contacts the superannuation company to say they do not want the insurance. However, the requirement for the opt out insurance only applies to some categories of members, whereas AEI is writing to all members. I suggest that the Australian Prudential Regulation Authority (APRA) should clarify the situation of the opt-out insurance in general, not just for AEI. Any commissions paid by the insurance companies should be disclosed and any interests directors or other staff of the superannuation companies have in the insurance companies should be disclosed.

A worker may have superannuation accounts at different funds. If each fund takes out an insurance policy for them, this could result in a large drain on the member's superannuation, for little or no benefit to the member. The member may not receive benefits from all, or any of the policies, as insurance policies often have clauses which exclude duplicate policies. Also the premiums may drain all the funds from a small superannuation account, at which point the insurance would be canceled.

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