At the Financial Services Council Life Insurance Summit Senator Jane Hume has said "fake news" about consumers losing life insurance due to the early release of super has irritated her.
Hume said consumers would not lose life insurance policies held through their superannuation if their balances dipped below $6000, they'd only lose the insurance if their balance dipped so low that they couldn't pay the premiums.
"A piece of fake news that I've heard repeated too many times is that if a person's balance dips below $6000 as a result of accessing their super funds will have to cancel their insurance as a result of the government's Putting Members Interests First legislation," Hume said.
"This simply is not true. If an account doesn't have enough money to cover premiums then coverage won't continue and super funds may have their own rules about the cancellation of insurance on accounts where balances are too low."
|Sponsored by Insight Investment|
Towards a perfect currency solution
Hume also suggested that she'd like to see some reform in the way mental health claims are handled by life insurers, acknowledging that COVID-19 was likely to have a serious mental health impact over the short and long term.
"Rather than having lump sum TPD claims, maybe there is a way life insurers could pay out for treatment rather than a lump sum? I have heard someone say that handing a lump sum to some people with mental illness is like handing a 16-year-old the car keys and a slab of beer," she said.
She added that she particularly wants to see the group insurance sector innovate to make sure consumers are getting value from the policies they pay for out of their retirement savings.
"We're trying to build a system in super that doesn't just represent the work force of 1992 but reflects the work force of the future," Hume said.
She added she was concerned that many people did not know what they were covered for in their life insurance held through their super and she doesn't like the idea of Australians paying for things they don't understand.
FSC chief executive Sally Loane asked Hume about APRA's concerns around the sustainability of life insurance companies.
"At some point there is going to be a sweet spot between coverage, affordability and sustainability. Having so much coverage within super is a good start but there's more that can be done," Hume replied.
In the next session, TAL chief executive Brett Clark, AIA chief executive Damien Mu and MLC Insurance chief life insurance officer Sean McCormack discussed the life insurance industry's response to COVID-19.
The session came as Loane revealed that the FSC's life insurance initiatives to support those impacted by COVID-19 would extend until January 2021. Those initiatives include the commitment to ensure frontline healthcare workers would not be excluded from obtaining life insurance cover.
McCormack said he was encouraged that it looked like the "door to regulatory reform is more open" that it had been previously.
Mu agreed with Hume that he hopes to see more early intervention and the ability to fund treatment, rather than life insurers paying lump sums only.
"I don't think they are mutually exclusive. We know from the data around early intervention that it can help people. I'm an advocate for that and for how life insurers can help people before they are classified as TPD," Mu said.
"I think it's a combination and they play different roles."
McCormack said he was focussed on reducing the cost of financial advice and increasing access to advice as this would have the greatest impact on consumers' awareness of the benefits of life insurance.
As the Life Insurance Framework Review approaches in 2021, McCormack said he hopes to see remuneration reconsidered so that "we don't see good life risk advice become the domain only of the very, very wealthy".
In a poll to the audience, rebuilding community trust and meeting consumer expectations was agreed to be the most important thing for the life insurance industry to focus on.
Clark said this would begin by the industry meeting the Life Insurance Code, delivering high quality claims experiences for customers
Read our full COVID-19 news coverage and analysis here.