Rice Warner’s submission to the Productivity Commission – Superannuation: Assessing Competitiveness and Efficiency (Insurance Aspects)

As part of its inquiry into the competitiveness and efficiency of the superannuation system, The Productivity Commission (‘Commission’) released an Issues Paper in July 2017. This Paper called for submissions from interested parties. This report forms Rice Warner’s submission covering the insurance aspects of the Issues Paper.

In summary, Rice Warner’s view is that insurance in superannuation provides a valuable benefit for working age Australians and their families. If life insurance were not built into the design of a MySuper product, most members would not be covered. The growth of insurance within superannuation over the last 30 years has closed the gap significantly between the insurance needs for a member (and their family) and the amount of cover provided.

Further, life insurance is provided in a way that is efficient, competitive and offers benefits to the Government and economy by way of reduced social security payments and increased spending capacity for members and their families.

This submission sets out to show:

• The levels of default cover have provided valuable insurance for most working Australians.
• Default levels of insurance cover do not inappropriately erode the retirement savings of most members.
• The extent to which life insurance cover offsets costs to Government in the form of reduced social security payments.

We acknowledge that there are aspects of the current system that could be improved to provide better outcomes for members. There has been criticism that:

• Young people are provided with insurance they don’t need – Rice Warner has previously made a submission to the Commission on improving the value of superannuation for young people.
• Default insurance can be excessive for some groups of members.
• People with multiple accounts may have duplicate insurance.
• Insurance premiums can be excessive and erode retirement savings.
• Disability income benefits are not good value.
• Claims handling is inefficient.

We have made various suggestions within this report to address these concerns.

To read the full submission, click on the below link.