Reforms protecting super members from paying multiple account fees and unnecessary premiums have led to unintended consequences, the Association of Superannuation Funds of Australia says.

A report from the association says about 11,000 people each year miss out on about $1.5 billion in total and permanent disability benefits as a direct consequence of the reforms introduced from 2019.

Some 5000 Australians a year have died without life cover and their families are collectively missing out on about $670 million in death benefits each year, it notes.

ASFA chief policy and advocacy officer James Koval says the research points to a significant mismatch between policy settings and the reality for people with super. 

“These laws were meant to protect balances, and that intent was sound. But the mechanism was too blunt,” he said.  

“Insurance was switched off by default, often leaving people unaware it had happened.”

The report says the Protecting Your Super Package and Putting Members’ Interests First Act were intended to spare account balances from erosion by premiums for cover members may not want or need. 

“However, members and/or their dependants may subsequently discover that cover was actually needed after experiencing an adverse life event.”

The report makes policy recommendations, noting much has changed since the reforms’ introduction.

It suggests extending opt-out insurance to all members aged 21 and over rather than 25; applying default cover to new full-time employees from day one rather than waiting for a $6000 account balance to accumulate; and replacing automatic cancellation of cover on inactive accounts with an enhanced opt-out process requiring members to make an active and informed decision.