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Heavyweights join opposition to opt-in proposal

Industry opposition to opt-in insurance in superannuation is growing, with TAL Life, Munich Re, MetLife and RGA Reinsurance making submissions to the Government.

TAL has told the Senate committee considering the reform that fund members with shorter or more irregular employment tenures will be excluded from the insurance benefits enjoyed by those making regular contributions, creating a two-tier, discriminatory system.

The proposed legislation does not take account of changing work patterns, including the move to more flexible, less routine employment, and the rise of the gig economy, TAL says.

TAL and Munich Re raise concerns that the legislation fails to protect fund members who have already made active decisions to take up a group insurance benefit.

Munich Re says clear action by a member to maintain their insurance – either through modifying their insurance arrangements or undertaking an underwriting process – will not be considered an active choice under the legislation.

If members cannot immediately be contacted, their cover will also unintentionally cease, Munich Re warns. Legislation wording should be rectified to fix this, it says.

MetLife warns the need to devote more marketing and administrative costs to encourage opt-in will drive up premiums. The reform will also inject instability into the group insurance system by disrupting the risk pools that drive pricing, it says.

RGA Reinsurance warns the change will increase operational risk for insurers and trustees, by forcing them to quickly restructure their group insurance offerings.

The industry is not resourced to undertake such pricing changes simultaneously, it says.

“We are aware of at least one superannuation fund that has already deferred a planned update of its insurance arrangements due to the announcements,” RGA Reinsurance says.