While the Insurance in Superannuation Code of Practice draft is a good start, it needs to explain the real impacts of rationalising funds and policies to ensure members are not left worse off, Maurice Blackburn Lawyers believes.
The law firm’s principal, Kim Shaw, welcomed the reinforcement of the need for default group insurance to remain through an opt-out system in the code.
“For years we have called for a binding code of practice for the industry that has teeth, and today’s draft Code has made a down payment towards the reforms needed,” Shaw said.
“We welcome that today’s draft code reinforces the critical value of default insurance within superannuation, and we also welcome the practical measures outlined to ensure that cover more appropriately supports the needs of young fund members.
“The proposal to cease a member’s cover after 13 months if no eligible contributions have been made is also welcome – this is a sensible step that protects the interests of new parents in particular who may have ceased making contributions whilst on maternity leave.”
Shaw noted the final code needed to approach the failures of the system through the eyes of the consumer, and greater detail on what enforceability role the corporate regulator would play in overseeing the process.
“The industry has suffered a significant loss of its social licence in the eyes of Australian consumers. While there has been some recognition of this, there must be a greater response in the final code to ensure decline rates are transparent, as well as more detail about how the code will relate to others who must play an ongoing role, including the legal profession,” she said.
“The final code must also address issues around lengthy forms for members – for many of our client fund forms are unnecessarily long and complex. Junk insurance clauses and inconsistent definitions we believe also will remain an issue for consumers under the current draft code.”