New FSC standard bars occupational exclusions in group life policies

31 January 2022

The Financial Services Council (FSC) has proceeded with plans for an enforceable standard prohibiting occupational exclusions in superannuation-linked default group life policies after launching consultation last August.

FSC says the standard, which will also disallow occupation-based restrictive disability definitions, will take effect on January 1 next year following a 12-month commencement transition period.

The standard is binding on FSC members who are super trustees and life insurance providers.

FSC developed the standard in response to concerns that superannuation reforms passed last year would leave workers in high-risk jobs without critical insurance protection.

The Your Future Your Super changes “staple” workers to a single superannuation account, a move the Government says will save Australians from paying unnecessary fees and group premiums. But consumer groups and actuaries say the reform will affect vital insurance coverage for super members in hazardous lines of work.

FSC says its analysis shows applying the standard to the FSC superannuation members will remove 87% of all occupational exclusions and occupation-based restrictive disability definitions that currently exist in the industry by January next year.

“An obligation on life insurers to not offer occupational exclusions and occupation based restrictive disability definitions to any superannuation trustees, together with ongoing consolidation in the superannuation sector and a powerful new industry norm is expected to see the remaining use of these terms removed in the near term,” the FSC said.

“This standard demonstrates that when policy settings change, the life insurance and superannuation sectors will take proactive steps to protect consumers.”

Click here for details about the standard.