AIA Australia chief executive Damien Mu has warned the group life insurance industry that last week’s Cabinet reshuffle will not slow down the federal government’s controversial plan to overhaul the $2.6 trillion superannuation system.
Speaking at the Investment Magazine Group Insurance Summit on Tuesday, Mu said it was “important” that the life insurance-in-super sector keep the pressure on both the government and the opposition to review sweeping changes first announced in this year’s federal budget.
“It’s important that we don’t get complacent and think that a change in [the] government means it is going to take a little time now. Continue to have conversations with ministers and in Canberra,” he said. “The worst thing is if…it gets passed without us knowing.”
Earlier this month, despite heavy lobbying from life insurers and funds, the Senate Economics Legislation Committee recommended that the set of budget proposals known as the Protecting Your Superannuation Package be passed with no amendments.
Opposition to the legislation in its current form has come from AustralianSuper, consumer group Choice, life insurance giants AIA and TAL and others. They requested carve-outs from the bill, which was referred to the committee for review at the end of June.
Of primary concern within the industry was the July 1, 2019, start date for implementation, because of the need for funds to renegotiate contracts with insurers.
Plans to make insurance opt-in for fund members under 25 and for those whose account balances are under $6000, and to cease cover for accounts that have been inactive for 13 months, could lead to higher premiums and also might disadvantage those needing cover, industry stakeholders said.
Mu said he was “disappointed in the government”, as it had not addressed what would happen to the $1 billion in claims the group insurance sector paid each year to people under 25.
He also questioned whether the $700 million in savings the federal government has forecast would materialise, since corresponding price rises had not been taken into account.
KPMG said in May that super fund members might pay up to 30 per cent more for cover under the government’s measures.
Despite this, then-minister for revenue and financial services Kelly O’Dwyer remained concerned that there were not adequate protections for super fund members with low-balance accounts, and said the Insurance in Superannuation Voluntary Code of Practice had not been sufficient to rectify the issue.
But with a Cabinet reshuffle as a result of last week’s leadership spill, which installed Scott Morrison as prime minister, the standalone financial services portfolio was removed and O’Dwyer took on the new portfolio of jobs, industrial relations and women.
Overseeing financial services are Treasurer Josh Frydenberg, Assistant Treasurer Stuart Robert and Assistant Minister for Treasury and Finance Zed Seselja.
On Tuesday, Mu said “another change in government” could pose problems.
“There is a new portfolio [in the Cabinet]…We haven’t got a new portfolio. We are here to do what is right for our members. We must stand up and do what’s right,” he said. “I am not saying we don’t need to make changes and, of course, we need to evolve.”
Labor senators Chris Ketter and Jenny McAllister said they were “cautiously supportive” of the bill and acknowledged that the Productivity Commission was also preparing its Stage 3 report into the efficiency of the country’s $2.6 trillion super sector, in which it would consider the impact of insurance premiums on retirement incomes.
In regards to industry concerns about the start date and active accounts with a sub-$6000 balance, the Labor senators said the committee would “continue to evaluate these concerns and seek to find suitable amendments that [would] improve the legislation”.
Once the report is tabled in the Senate, the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 can move forward for debate.
