Code of Practice is about informing choices

By

11/07/2018

Australia has a world-renowned superannuation system but we can’t rest on our laurels, we must continue to improve and drive best practice. At BT, we recently announced we would adopt the Insurance in Superannuation Voluntary Code of Practice (the code) for superannuation trustees and implement the new standards.

It’s fair to say the code has been controversial. We also know there’s a general lack of awareness in the community of the value of insurance, and many Australians don’t realise insurance comes with their MySuper unless they opt out. At BT, we’ve seen numerous examples of members contacting their banker or BT to say they are experiencing financial hardship due to illness or injury, and having their lives turned around when they discover they have valuable insurance they can claim.

In a default system, it’s important to balance the provision of this valuable cover with the cost of it, so members’ super benefits are there for them in retirement. That’s why BT supports the code, and why we are continuing to provide default cover to all our members, especially the younger ones, for whom the impact of a major illness or injury can be most severe, in terms of future
lost earnings.

BT has chosen to lead the superannuation industry by calling on all participants to make the code binding for all funds. This will ensure members have the comfort that, no matter which fund they choose, certain important standards will be met.

BT already meets or exceeds many of the code’s standards.

We already communicate to ensure members are aware of the potential impact of premiums on their account balance, yet we very much approve of the increased communication requirements in the code, as they will help more Australians make better-informed choices about their insurance in superannuation.

We undertake annual reviews of our offerings, and in our insurance designs we consider characteristics such as age, occupation and salary to provide cover tailored to individuals’ needs. Our default designs recognise insurance needs differ, which means, for younger members, we provide higher levels of total and permanent disability cover and lower death cover. For older members, the amount of cover may reduce, recognising the different needs for this segment, due to their growing super balances.

At BT, our philosophy is about ensuring more Australians have access to the best possible life insurance cover and service at the most sustainable price. We believe that transparency leads to better claims outcomes. More than 600,000 of our 1 million superannuation members have insurance. We paid more than $200 million in claims in financial year 2017.

Implementation

This may be especially relevant for the situation in which, under the code, a member’s insurance cover may be automatically cancelled if no superannuation contributions are made to their account for 13 months.

Premium cessation and the potential resulting loss of valuable insurance cover for people taking extended leave will predominantly affect women with parenting responsibilities. A person may be on parental leave for up to two years but insurance cover may be cancelled after just 13 months of no super contributions to their account. It’s important that anyone who is planning a break from the workforce advises their fund they may wish to keep their cover.

Similarly, it will be important for members to be able to regain access to their default insurance cover if it is automatically cancelled.

The code will give rise to complex implementation considerations that will need to be worked through in order to ensure they do not result in unintended consequences for the super fund members it is aimed at protecting.

Our focus will also be on further enhancing our insurance designs and supporting service model, including through technology and functionality enhancements.

We believe Australians should have appropriate and affordable cover. The code will help ensure the right balance between providing that and protecting savings for retirement.