Lawyers call for standardised group life policy terms

A leading superannuation and insurance law firm has given its “hot agreement” to Banking Royal Commissioner Kenneth Hayne’s recommendation that the rights and obligations of insurers and insureds need to be better delivered in the delivery of MySuper products, calling for the standardisation of insurance terms and conditions.

The law firm, Berrill & Watson, offered its support to Hayne’s comments in a submission to the Treasury Financial Services Reform Taskforce, saying that “the question is the what and the how” rather than whether change was needed.

It advocated the standardisation of terms and conditions for group insurance, saying that the current formula to deviate from standard cover currently used for individual insurance contracts could be maintained for super fund members applying for additional cover or seeking to opt out of non-mandatory standard terms and conditions.

A working group of insurance companies, super funds and consumer representatives could consider the issue.

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Berrill & Watson also said that, in its view, any total and permanent disability (TPD) insurance benefit under a MySuper product that was inconsistent with the ‘permanent incapacity’ definition under the Superannuation Industry (Supervision) Regulations 1994 was contrary to law.

“Accordingly, it is our view that the permanent incapacity definition which could be characterised as the standard ‘suitable occupation’ definition with a comparatively generous ‘unlikely’ test is already prescribed by legislation for all MySuper products,” lawyers from the firm wrote.

“In practice, a significant number of MySuper TPD definitions deviate from this permanent incapacity definition and in some cases adopt a much narrower definition, which is of concern.”

Berrill & Watson also called for other common terms and conditions to be standardised, such as eligibility requirements, exclusions, benefit limitations, offset clauses, and claim requirements.

“There is a balance to be struck between certainty and flexibility and it would be important to foster and not stymie market competition and innovation,” the authors of the submission acknowledged.

“However, in our submission, the case for some standardisation to bring the life insurance industry in line with other financial services industries and to restore public confidence is overwhelming.”