Super fund members’ life insurance cover ‘at risk’ from regulatory reforms

New research from MLC Life Insurance suggests 60 per cent of superannuation fund members have never heard of the stapling reforms implemented late last year, which leaves them “at risk” of having inadequate or no life insurance protection when changing jobs.

Introduced last November, the stapling reforms require employers to make super contributions to an existing fund for new employees unless the employee decides otherwise.

Given that 70 per cent of Australians hold life insurance inside superannuation, MLC Life Insurance chief group insurance officer Mark Puli said super funds and insurers must do better to keep their members informed.

“It’s disappointing to see most members are unaware of stapling. 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.

“The average Australian changes jobs 12 times throughout their lifetime. In that time, they may get married, have kids, buy a home, and take on more debt. It’s imperative that members have the right cover for their needs and if they aren’t prompted to review it, they simply won’t.”

An MLC Life survey of 1,500 members also found that only 42 per cent ever review their life insurance cover in superannuation.

58 per cent of members who have modified their insurance said they are more likely to stay with their fund in the future, however, just 23 per cent were aware they could do so.

“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,” Mr Puli continued.

“Our focus has therefore been on improving the way technology is used to allow members to make changes to their cover simply, and to do so in a more transparent way.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.