Majority not aware of 'stapling' reform, MLC report finds
More than half of superannuation fund members have not heard of the Federal Government’s “stapling” reforms and just 25% say they understand what they are covered for under their life policies, according to a report by MLC Life Insurance.
MLC says the report’s findings underscore the need for the industry and superannuation funds to do more to engage with fund members, given that 70% of all life premiums – both group and retail – flow through the super system.
“We found an alarming lack of awareness and engagement with their insurance policies,” Chief Group Insurance Officer Mark Puli said in the report’s foreword.
“In fact, almost two-thirds of policy holders don’t understand what they’re covered for, or why.”
He says as regulatory change reshapes the industry, putting more onus on members to make an active choice about their protection needs, life insurers and superfunds must redouble their efforts to lift member engagement.
The report surveyed 1500 super fund members in November and December last year to find out how they are engaging with their group insurance products within super.
MLC says the findings confirmed that urgent steps are needed to help combat startlingly low levels of engagement and awareness among members, warning the “disconnect” has serious consequences both for the industry, and for superannuation funds who have a duty to protect member interests.
Mr Puli says it is disappointing to see that most members are not aware of the “stapling” reforms that were introduced by the Government last year.
The reforms commenced in November and are aimed at preventing workers from holding multiple super accounts and paying unnecessary group insurance premiums.
The change means where an employee has an existing superannuation account, that account will be “stapled” and follows them when they change jobs.
But consumer advocates and other stakeholders have voiced concerns the change may lead to some workers, especially those in physically demanding and hazardous occupations, losing out on critical coverage because of occupational exclusions in default insurance products.
MLC says at the time of the research about 60% of survey participants were not aware that the “stapling” reform had come into effect.
The MLC report says this poses a potential risk for individuals who change jobs, in particular those not covered by default and people who are stapled to a fund but move into a role that’s riskier to their health and safety.
“We understand and support the intent of these changes – to reduce the number of Australians with multiple superannuation accounts – but in practice it means people won’t have the right cover for their circumstances,” Mr Puli said.
In other key findings, the report says 83% of Australians with insurance in super believe it is important but only 42% ever review their cover.
About 43% say they do not think that the life insurance they have is right for their circumstances and 71% say they want it to be more personalised so that they only pay for what they need.
Click here to access the report.
