Julia Newbould, Noel Lacey and Carolyn Lansdowne.

Superannuation executives who have embraced the Dangerous Occupation Exemption, a carve-out from Putting Members Interests First legislation introduced three years ago, have voiced surprised so few peers have followed suit

Delegates at the Investment Magazine Group Insurance Dialogue last month heard how members of Cbus, which covers the construction and building industry, and TWUSUPER, a fund for the transport industry, have benefitted from the DOE.

It allows funds with members in dangerous occupations to be automatically insured even if they are under 25 in age or have account balances below $6,000.

Noel Lacey, head of insurance at Cbus, said his fund had been able to provide 210,000 members – 93,000 existing members and 117,000 plus new members – with automatic insurance cover since April 2020.

Of these members, 441 had subsequently died or experienced a disability or terminal illness. They had been paid $54.9 million in insurance benefits.

If Cbus didn’t have a DOE, members in all three of those categories would have received zero in payouts, said Lacey.

He noted that 30 per cent of claims were for teenagers or members in their 20s.

“This is not an older person’s benefit,” he said.

“It might have been thought that insurance isn’t much for younger members, new members or those with low balance issues. For us, we’ve certainly seen those under 25s or with low account balances as two potentially vulnerable groups.”

TWUSUPER insurance specialist Carolyn Lansdowne said it was a no-brainer and in TWUSUPER members’ best financial interests to make use of the DOE.

She noted that the Protecting Your Super (PYS) laws had decreased the fund’s insured pool by 23 per cent and resulted in a 14 per cent jump in premiums for its membership. When PMIF came along, TWUSUPER’s analysis indicated that it would lose another 23 per cent of its pool and experience a further 14 to 15 per cent increase in premiums if the fund didn’t embrace the DOE exception.

“So anywhere up to a 30 per cent uplift in premiums was going to push our affordability well beyond what we wanted and that would have triggered us to relook at cover levels and potentially be facing junk insurance,” said Lansdowne.

Low uptake

Aware Super has applied the DOE for members who are police or ambulance officers and firefighters, but both Lacey and Lansdowne told the gathering that they were surprised that more funds hadn’t done so.

Lansdowne noted that when it was first announced, she called her industry contacts that had members with occupations covered by the DOE, but Cbus was the only fund she found that was considering applying it.

She said the reasons given by other funds for not going down the DOE path included that the changes required were too costly and too hard. There was also too much other stuff going on, for example, people were still digesting the PYS changes.

Lacey agreed with these reasons. “It might not have been the highest priority item for them, but legislation is still there, and you can still make use of it,” he said.

Unintended consequences

Earlier in the day, Minister for Financial Services Stephen Jones told the Group Insurance Dialogue that the DOE was something he was thinking about reviewing. He acknowledges that stapling may impact members accessing insurance, a possible unintended consequence of the DOE.

Lacey said Cbus had also looked at this issue and might have a closer look at it again.

“The exemption provides Cbus with the ability to largely deal with existing members in the way that we would like to but what is the stapling impact for people moving around?” he asked.

“It’s got to be difficult in cases where you got two people in different funds. One would get paid and one wouldn’t, or when they do and don’t have cover. We are already hearing from employers, stakeholders and key unions that are concerned about this issue.”

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