Senator Jane Hume has provided an affirmation that there is “great value” in group insurance, while also indicating that the industry needs to do more to educate and inform members about the coverage they’re getting.
Speaking with Financial Services Council CEO Sally Loane on day 1 of the FSC’s Virtual Life Insurance Summit 2020 webinar, Hume said she believes life insurance plays a great role in superannuation.
That value, however, needs to be predicated on making sure the vast majority of Australians “know what they’re covered for and that the quality of that insurance”, Hume said.
“I don’t like the idea of Australians paying for things they don’t necessarily understand,” Hume continued. “But there is such great value in insurance, and the risk of underinsurance is a significant one for the government.”
Hume also revealed the government is “open” to the idea of TPD insurers paying for claimants’ treatment rather than large lumps sums, which she suggested could not only help keep the industry sustainable but also benefit consumers. Mental health total permanent disability claims – which have doubled in recent years – is one of the industry’s “looming crises”, she said.
“One of the things that I know life insurers have been talking about is… rather than having TPD claims for mental health as lump sums maybe there’s a way that life insurers could pay out for treatment rather than as a lump sum,” Hume said.
The assistant minister for superannuation, financial services and financial technology said handing someone with significant mental health problems a large lump sum could actually translate into other problems such as gambling.
“It’s a little bit like handing the car keys to a 16-year old,” she added. “So perhaps a better way to do it would be to pay for treatment.”
Both the Treasurer and the health minister were open to the idea of changing the way TPD is paid, Hume revealed.
In a subsequent session on the webcast, AIA chief executive Damien Mu noted that there would need to be a sharp legislative turn for this kind of change to take effect.
“That’s about having a policy change [regarding] the current restriction around the Life Insurance Act which prevents life insurers from early prevention payments around rehabilitation,” Mu said. “If we can get that moving that’s the most important policy change we can make right now.”
Lump sum payments and treatment payments needn’t be mutually exclusive, Mu reckons. “There’s a place for lump sum payments as well,” he said.
MLC head life insurance officer, Sean McCormack, said he was heartened to hear that Hume was “congruent to the challenges the industry faces”.
“It feels as though the door to legislative reform may be slightly more open than it has been in the past,” McCormack added.