The Insurance inside Superannuation Working Group (ISWG) has been slammed by plaintiff law firm Maurice Blackburn for its inability to impose a compulsory code of conduct on either insurers or superannuation funds.
In a submission to the Senate Economics Legislation Committee inquiry into the legislation underpinning the Government’s Budget move to make insurance inside superannuation “opt-in” for those aged under 25s, Maurice Blackburn has pointed to flaws in the legislative approach and blamed the ISWG.
It said the Minister for Revenue and Financial Services, Kelly O’Dwyer had backed the legislation on the basis of it protecting under 25s from account erosion, but her backing was a reflection of the inadequacy of the ISWG.
“Maurice Blackburn understands that the provisions of the Bill are designed to enact the Minister’s commitments,” the submission said. “These provisions highlight the ineffectual nature of the Insurance in Superannuation Working Group’s voluntary code.”
“The fact that legislation is necessary to stem the erosion of low balance funds is a sad indictment on the capacity of the industry to do what’s right, by their own volition,” Maurice Blackburn said.
Warning of the unintended consequences which might flow from the Government’s legislation, the law firm said it disputed the assumption that all superannuation account holders aged under 25 did not need insurance.
“There is an assumption in the proposed legislative change that those under 25 do not, across the board, have dependents and assets to protect; and this needs to be taken in to account,” it said. “The fact that they are under 25 does not necessarily mean they would not have a need for TPD insurance.”
“In the event someone under 25 experiences total or permanent disability, this could also leave him/her exposed to the possibility of having to fend for him/herself in covering the cost of medical expenses that should have been picked up by insurance,” Maurice Blackburn claimed.
It warned that unless the issue was addressed, it was the taxpayer and the public health system that would end up bearing the brunt of the insurance gap.