A superannuation lawyer has called on the Government and the corporate watchdog need to create a campaign to notify superannuation members who are part of the dangerous occupations carve out during the transition period.
Berrill and Watson Lawyers principal, John Berrill, told Super Review that the Government and the Australian Securities and Investments Commission (ASIC) needed to notify and educate members on the new changes before the rules changed on 1 April, 2020.
On 1 April, 2020 superannuation members under 25 with balances less than $6,000 would be stripped of their insurance in super, moving the insurance from an ‘opt-out’ basis to an ‘opt-in’ under the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019.
However, the Government created a carve out for members in ‘dangerous’ occupations.
Super trustees need to notify these members in dangerous occupations by 1 December on whether they wanted to opt-out of their insurance in super.
Berrill said it was a huge task for trustees to identify out which of their members were categorised as part of a ‘dangerous occupation’ and it was unclear whether there would be legal ramifications for trustees who misidentified members.
The funds have to apply for the exemption via an actuary who identifies if a member is part of the list or by using WordSafe data.
Berrill noted that there was no clarity around whether a member would have their insurance stripped if their occupation changed.
When Labor Senator Jenny McAllister asked Senator and Minister for Superannuation, Financial Services and Financial Technology, Jane Hume, during a senate committee reading about legal ramifications trustees might find themselves when making individual risk profiles without adequate information, Hume simply said using WorkSafe and actuaries was adequate.
“Perhaps this legislation will encourage those trustees to take a better interest in the members that they have, to make sure that the product they're offering is entirely appropriate, rather than obfuscating that responsibility, which seems to be happening now, and relying on the opacity and complexity of this industry to simply reap the fees for insurance premiums that these people possibly don't want, don't need, might not be able to claim on and don't understand,” Hume said.
“The amendments that the government has put forward are based on WorkSafe information, which actually does provide the information that you're seeking there. That's the best proxy we can possibly find, because essentially the data sits with the insurance company.
“…just because you have a high-risk occupation doesn't necessarily mean that you need insurance. It's about the need for insurance. In fact, the high-risk occupations essentially are a proxy for need.”
Berrill said the timing of the communications sent to members was less than ideal as members were unlikely to make an action towards the end of the year and at the beginning of the year, and members were likely to forget thereafter.
“The Government and ASIC need to fill the gap between December and April before the new rules change to notify and educate them again either through letters, emails or ads,” Berrill said.
“They had a dry run with the inactive super accounts and a lot of people did not receive letters, had moved or were in rural communities. It was also difficult for members to actually make a contribution and the deadline date was a mess as funds were inundated with calls.”
Berrill said ASIC, the super industry, and consumer groups also needed to work together to create a standard template letter to enable funds to send an agnostic letter to members stating their rights and choices, so that it could not be construed as financial advice.
“Funds have been criticised for letters previously because they were too long and confusing and ASIC claimed they were pushing members into keeping cover,” he said.
Berrill noted that to opt back into the insurance was also an issue was it was not automatic. Members would need to undergo health checks and funds might not agree to provide the same cover or insurance at all.
In terms of remote communities, the lawyer said the Government and ASIC could send mobile vans to educate and notify members living in those areas.