SMH Devils are in the detail article

I’ve previously cautioned about the considerations and potential shortcomings of having insurance through superannuation, including your own self-managed super fund (SMSF) - refer to ‘Not so Super – Income Protection’. The attached article appeared in the Sydney Morning Herald a couple of weeks ago and relates to a very different issue with potentially far more insidious eventualities. It is a well-known issue in the industry that ‘group insurance’, most commonly found within industry superannuation funds like REST, is the much poorer cousin of comprehensive personal insurance.

No application forms, no medicals, ridiculously low premiums (until recently) and don’t bother looking at the fine print. What started out as altruism by the industry funds, providing their members with basic low cost cover through their super, has become a key issue for both industry superannuation and the insurance industry. Insurers have pandered to the industry funds’ demands for ‘more for less’ and are now suffering the repercussions - poor claims experience, often through targeted adverse selection. Their response has been to ramp up premiums for these funds and re-word contracts in an effort to limit liability. No-one wins in this, certainly not the members, and the insurers and industry funds are much maligned. The insurers have yet another image crisis to defend and the industry funds are pointing fingers.

It is clearly unfair that some of the most vulnerable people in our society are left to deal with a medical crisis without the obscure ‘cover’ they thought their super would provide them. It’s also a sad fact of life that you usually ‘get what you paid for’. That doesn’t make it right! It does however scream out the need for greater education of the general public and especially those people who cannot afford any other cover than that afforded by their super funds. Greater regulation (dare I say it) of this mandated industry is also required. The industry super funds hold (and yield) great power through the control of their members’ retirement savings. I can’t help feeling underwhelmed by their current efforts to execute their contingent fiduciary responsibility. No, not all industry super funds...some of these funds like Q Super (Queensland government employees) and Super SA (South Australian government employees) provide excellent benefits to their members; maybe that’s the answer.

You can read the article here published in the Sydney Morning Herald on 6 August 2016.