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FSC bans occupational exclusions in default group life policies

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The Financial Services Council (FSC) says it aims to introduce an enforceable standard banning occupational exclusions in default group life insurance in superannuation by January 2023.

The standard will apply to both FSC superannuation and life insurance members.

FSC announced the move last week, following consultation it launched in August amid concerns that recently passed superannuation reforms would leave workers in high-risk jobs without critical insurance protections.

A key thrust of the Your Future Your Super involves “stapling” workers to a single superannuation account, a move the Government says will save Australians from paying unnecessary fees and group premiums.

But consumer groups and actuaries say the change will affect vital insurance coverage for super members in hazardous lines of work.

FSC says it will soon finalise the standard with the target date of requiring trustees to remove their occupational exclusions and restrictive disability definitions for members in high-risk occupations by January 1 2023.

The standard is subject to further consultation with regulators, including the Australian Competition and Consumer Commission.

FSC says the twelve-month transition period is designed to enable trustees and life insurers to re-negotiate existing group life policies that are currently in place, and for trustees to engage with members.

The enforceable standard will apply to all default cover for life insurance, total and permanent disability and income protection insurance in MySuper and Choice products.

It will also prohibit the use of exclusions and restrictive disability definitions because a member is employed in a high-risk occupation.

“The FSC and its members recognise that Australians must be able to claim on the default cover that they have been paying for through their superannuation,” the peak body said.

“The FSC will not, however, prevent trustees from choosing not to offer cover to a new member based on their occupation when the member joins the fund. In these circumstances a member will not be charged insurance premiums.

“The standard will also not apply to individually underwritten life insurance in superannuation.”

Treasury is currently undertaking a review of occupational exclusions in default group insurance offered by MySuper products.

Click here for submissions to the FSC consultation.