The Aon Master Trust has written to members advising that those with account balances under $5000 and no recent contribution activity may lose their automatic group insurance cover.

Aon’s head of retirement products, Peter Lewis, said the $1.6 billion master trust was merely formalising the type of conversation it had long had with members’ financial advisers.

“We just want to make people aware that if their balance is low and reducing, the insurance premium is eating into that. If they don’t have a great need for our cover – perhaps they have cover elsewhere – then maybe they’re better off not having additional cover through the Aon Master Trust,” Lewis said.

There has been an increasing trend for advisers to split up their clients’ super with an eye on making them eligible for group insurance coverage, which is cheap in comparison to individually-underwritten retail cover. A classic play has been to put the bulk of a clients’ wealth into a self-managed super fund, and then park a token amount into an industry fund or personal master trust to qualify for the automatic death/disability cover.

“But someone needs to be monitoring and making sure there is a sufficient account balance to keep paying the premiums. It would be a really poor outcome if the first that someone hears about their cover lapsing is when they go to make a claim,” Lewis said.

“So who should be responsible for that monitoring? Is it the adviser, is it the insurer, is it the fund? For the [Aon Master Trust’s] part, we think its just good corporate governance to police it and tell members under what circumstances their cover might be discontinued.”


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