Insurance provided through a superannuation fund is a genuine benefit based on a policy held by the fund trustee with an insurer. It is a benefit because Australia suffers from a very large underinsurance problem and super funds are able to plug this gap with default cover provided to eligible members. Until 1 April 2020, it was provided to new members on an ‘opt out’ basis for their convenience.
At NGS Super the trustee decided from the fund’s inception that default insurance for eligible members was in the best interest of the majority of members and it could be provided at low cost compared to retail policies because of the large number of members covered under the group policies. I have personally seen thousands of members and their dependants benefit from the provision of insurance through super in times of death, illness and accident.
NGS Super provides Death, Terminal Illness, Total and Permanent Disability and Income Protection as a member benefit and if members who joined before 1 April 2020 do not want their automatic cover they can opt out by filling in one form.
The most common complaint which comes across my desk is a demand for a refund on premiums on insurance the member does not want. Some of these complaints abound with conspiracy theories and in one recent case the member lodged a formal complaint with the Australian Financial Complaints Authority demanding a refund of all insurance premiums going back to 1990.
This same member had received regular member statements clearly showing the levels of cover, the types of insurance and the premiums deducted which were all paid to our insurer for cover. If a valid claim had arisen, the member would have been paid. As a not-for-profit industry fund, any monetary compensation to this member by way of refund of premiums would of necessity have to be effectively deducted from the retirement accounts of other members.
There have been some recent legislative changes to insurance and all NGS Super members have been sent Significant Event Notifications explaining the new regulations which they should pay attention to.
First, under new Protecting Your Super (PYS) rules from 1 July 2019, where an account has been inactive for 16 months, the fund is required to cancel all insurance unless the member tells us they wish to keep it. This is a significant change as many members elect to keep their inactive accumulation accounts to ensure their NGS Super cover remains in force. A rollover or contribution can work to remove the “inactive” categorisation and the account can remain open. NGS Super will notify members when their account has been inactive for 9, 12 and 15 months in order to provide an opportunity for members to maintain their insurance.
Under the new Putting Members’ Interests First legislation (PMIF) that came into effect on 1 April 2020, trustees can only provide insurance to new members on an opt-in basis if they are under 25 and have an account balance under $6000. This measure is obviously put in place to preserve the balances of small accounts and for younger members the government believes may not need this insurance. The veracity of this belief has yet to be seen as we have had many existing members under 25 claim on their insurance. Again, members fitting into the above categories can advise the fund that they wish to opt in to insurance.
So members are advised to think carefully about their insurance and whether the levels of cover are correct for their personal situation. For example, a member who belongs to two funds providing Income Protection insurance could be wasting their money as generally only one policy will pay the insurance. Similarly, a member who has moved to part time employment may be over-insuring their salary – paying for insurance on which they would not be able to claim.
NGS Super has again this year (for the third year in a row) won the Chant West award for best insurance offering of any superannuation fund in Australia. Besides price, cover levels and member service, communication to members was also considered for this award. The NGS Super website (www.ngssuper.com.au) has all the information you need about your insurance cover, so please take the time to look at it or call us if you prefer to ask questions.