28 April 2022
Less than six months since the Australian Parliament implemented stapling reforms, new research from MLC Life Insurance reveals a massive 60% of superannuation fund members have never heard of them, potentially leaving them with inadequate or no life insurance protection when they change jobs.
The reforms, which came into effect on 1 November 2021, require employers to make superannuation contributions to an existing fund (‘stapled’ fund) for new employees, unless the employee decides otherwise. If new employees do not decide on a new fund, employers are no longer allowed to automatically create a new super account in the employer’s chosen fund, which includes important life insurance protection.
More than 70% of Australians hold life insurance inside superannuation. In 2021, 45,000 claims worth $3.7 billion were admitted for life and TPD, providing cover for members or their beneficiaries when they needed it.
Mark Puli, Chief Group Insurance Officer, MLC Life Insurance, said the research shows superannuation funds and their insurers must do better to explain these reforms to members.
“It’s disappointing to see most members are unaware of stapling. We understand and support the intent of these changes - to reduce the number of Australians with multiple superannuation accounts - but in practice it means people won’t have the right cover for their circumstances.
The average Australian changes jobs 12 times throughout their lifetime. In that time, they may get married, have kids, buy a home, and take on more debt. It’s imperative that members have the right cover for their needs and if they aren’t prompted to review it, they simply won’t.”
Sadly, the research shows that women are less engaged than men with their insurance. 37 per cent of women say they are engaged with their insurance, nearly 10 per cent lower than men (46 per cent). Under the reforms, if women take time out of the workforce to care for children for more than 16 months, their default life insurance is automatically switched off.
In other findings, the survey of more than 1,500 members revealed:
- The majority (83%) of Australians with insurance in superannuation said it was important, however only 42% ever review their cover.
- 43% say they do not think that the life insurance they have is right for their circumstances, and 71% say they want it to be more personalized to them, so that they only pay for what they need.
- Encouragingly for funds, 58% of members who have modified their insurance say they are more likely to stay with their fund in future. However, worryingly, only 23% are aware that they can actually do this.
According to APRA’s recent data on claims handling statistics in the life insurance industry1, nearly 90 per cent of all Total and Permanent Disability claims and 96 per cent of all income protection claims were accepted through group insurance in the last 12 months.
Mark Puli continued:
“We strongly believe in the benefits of life insurance in super and think these benefits should be available as widely as possible.
As regulatory change reshapes the industry, putting more onus on members to make an active choice about their protection needs, life insurers and superfunds must redouble their efforts to lift member engagement. Our focus has therefore been on improving the way technology is used to allow members to make changes to their cover simply, and to do so in a more transparent way.”
Click here to access the report.