The Financial Services Council (FSC) is proposing to prohibit any terms in MySuper group life policies that could cause a claim to be declined in default group life insurance in superannuation on the basis of a change in occupation.
The FSC issued a policy proposal to address the life insurance issues brought about by the Government’s Your Future, Your Super stapling measure.
“Superannuation members can be stapled to a MySuper fund that has default group life insurance that contains exclusions based on occupational classification,” the FSC said.
“In a small number of instances when an employee moves between occupational classifications, at time of claim they may find themselves unable to claim against their default insurance coverage in the MySuper product.”
The FSC’s proposal asked for feedback on different options to implement the solution and the options included:
- Implement a prohibition on these terms on life insurers through an appendix to the FSC’s Life Insurance Code of Practice (Life Code), noting that whilst all group insurers are members of the FSC, complexity arises from the Life Insurance Code being mandatory for life insurers and not superannuation trustees;
- Introduce an enforceable FSC Standard that requires FSC members to not establish group policies that contain these terms and remove them from existing policies, noting that not all superannuation trustees are members of the FSC; or
- The FSC issues industry guidance that stakeholders can consider as part of determining the design of group policies.
The council said it was looking for feedback on the proposal until 3 September, 2021.