The Financial Services Council (FSC) is introducing an enforceable standard that will prohibit the use of exclusions and restrictive disability definitions in default group life insurance for those who are in high-risk occupations.
The standard will apply to FSC superannuation and life insurance members for all default cover for life insurance, total and permanent disability and income protection insurance in MySuper and choice products.
It comes as consultation on a review of occupational exclusions is due to wrap up this week, with the government looking to find solutions to problems that arise from occupational exclusions in MySuper products.
Occupational exclusions in default insurance policies affect the automatic acceptance of default cover for some new MySuper members and may also have significant consequences where a member changes occupation, Senator Jane Hume said.
|Sponsored by MLC Asset Management|
Find out why 44% of advisers are using managed accounts
The FSC said Australians must be able to claim on the default cover that they have been paying for through their superannuation.
However, the FSC will allow trustees to choose not to cover a new member based on their occupation when joining the fund.
"In these circumstances a member will not be charged insurance premiums. The standard will also not apply to individually underwritten life insurance in superannuation," The FSC said.
The new standard comes after the Your Future, Your Super reforms which staples superannuation members to their fund, however some members may not be able to claim on life insurance cover because their fund has occupational exclusions in its default group life insurance.
The standard is expected to come into effect on 1 January 2023 but is subject to consultation with regulators including the ACCC.
"This 12-month transition period is designed to enable trustees and life insurers to re-negotiate existing group life policies that are currently in place, and for trustees to engage with members," the FSC said.
"The success of the FSC initiative will be dependent on the government facilitating better data sharing between trustees, insurers and government agencies, particularly the ATO, to improve the quality of data on members' occupational classifications."