Minister for Revenue and Financial Services Kelly O’Dwyer has raised concerns that superannuation members do not receive value for money from default insurance premiums.
She told the Financial Services Council (FSC) Life Insurance Conference some members pay too much for cover that goes beyond their needs.
The benefits of default cover should not be outweighed by erosion of retirement savings through high premiums, Ms O’Dwyer warns.
In 2016 $8.4 billion was spent on insurance premiums provided through super.
Almost 14 million accounts have life insurance, mostly default cover. More than 70% of life insurance policies are held through super.
Ms O’Dwyer says it’s important to ensure members receive appropriate life cover, value for money and outcomes.
She also raised concerns over members paying for two life insurance policies after changing employers and being placed into default super cover.
About 40% of Australians have multiple super accounts, according to the Australian Taxation Office. In 2014 almost 50,000 had five or more accounts with insurance premiums on each.
Ms O’Dwyer lamented the fact the code of conduct created by the Insurance in Superannuation Working Group is non-binding on trustees.
The FSC’s industry code must deliver meaningful change on issues such as this, she says.
She says the Government will soon consult on extending unfair contract term provisions to general and life insurance contracts.