Home / Life Insurance / SIS Act amendments to fix reform contradictions
18 November 2019
The Federal Government is planning to amend insurance in super rules in the Superannuation Industry (Supervision) Act to fix some of the contradictions created by the insurance in super reforms.
In a letter sent to all super funds last week, the Australian Prudential Regulation Authority (APRA) says the Act will be amended so that the Tax Office (ATO) can reunite lost or low-balance inactive accounts with active accounts without it affecting the rights of members who hold fixed term insurance cover, “so that this type of insurance cover is not removed”.
Legacy products providing fixed term insurance cover that don’t receive ongoing contributions aren’t intended to be subject to these reforms, it says.
This may affect conventional products where switching off cover may have an adverse effect on the member, such as those products that are fully paid up or are non-premium paying, it says.
APRA also says that members only need to opt-in to insurance once under the Protecting Your Super reforms for it to be valid under the Putting Member’s Interests First reforms, and vice versa.
The regulator is also supplying a template letter for trustees to maintain insurance arrangements for members who work in dangerous jobs. The exemption must be made in writing, published on the trustee’s website and start on the day it is submitted to APRA. It can also be withdrawn by the trustee.
About 2.3 million low-balance inactive accounts have been transferred to the ATO since the end of October, and nearly 700,000 accounts have been matched by the ATO with an active account elsewhere.
Approximately four in every 10 Australians who hold a super account are paying at least two sets of fees and potentially two or more sets of insurance premiums, Assistant Superannuation Minister Jane Hume says.
APRA has also reminded trustees that it expects communication about the reforms to be factual, balanced, and in appropriate context.
The letter and dangerous occupation exception templates can be found here.