Superannuation and life insurance industry executives have hit back at Andrew Bragg’s characterisation of group insurance as “junk insurance”.
The outspoken Coalition Senator told the Investment Magazine Insurance in Super Summit on Tuesday that he was not convinced of the public interest merits of group insurance arrangements, confirming that the upcoming review of the sector by the Senate Economic References Committee he chairs would consider whether the business model “should continue”.
“I would say to you that the idea of insurance in super is an interesting idea,” he said at the summit.
“I think for a lot of people, insurance in super is junk insurance, and I think the trustees in many cases have conducted themselves appallingly.”
The comments sparked the ire of some delegates to the summit. One senior insurance executive who cannot be identified as the audience Q&A was conducted under the Chatham House rule, questioned how group life, total and permanent disability (TPD) and income protections could be called “junk”, when insurance via their super is the only coverage many Australians can have.
In response, the senator said insurance can be considered as junk if they are “paid at a rate which is so low, relative to what that person might be expecting and particularly if their premiums are particularly high”.
He said the super industry cannot be expected to solve the insurance problem alone, and that members should be encouraged to talk to a financial adviser.
But the audience interjector said the previous Coalition government should take some responsibility for introducing a “disgrace” of a policy that resulted in the decimation of life insurance specialist advisers, in what was seemingly a reference to multiple regulatory reforms, including the Life Insurance Framework and mandatory education and ethics standards.
“We have to try and pick up the pieces and fix it,” the executive said.
Another industry executive pointed out that retail insurance pays a claim loss ratio of around 65 per cent, whereas group insurance has a much better rate of 85 to 90 per cent.
Bragg conceded then that he is not saying all insurance are junk, but that there have been some “junk outcomes” for members.
“I’m just very concerned about this set and forget mentality and I don’t like this idea of paternalism. I don’t think Australians are too stupid to save for retirement,” he said.
“If you look at the data out to 2063 in the intergenerational report, which is produced by the Treasury, you’ll find that most Australians are still on the pension anyway.
“The idea that Canberra can solve everyone’s personal financial outcomes, I think it’s very dangerous, risky thinking.”
Bragg echoed Minister for Financial Services Stephen Jones’ comments at the same event that it’s too early to announce success in eliminating delays in claims handling.
“It shouldn’t be the case that people have to come to, effectively a parliamentary inquiry or the media to get a proper outcome [for their insurance claims],” he said, pointing out that AFCA has seen the worst year in terms of insurance claims in FY23.
“I’m not sure that anyone can claim success here in relation to these insurance issues.”
But where the two parties diverge is on whether super should remain in preservation. As the federal election deadline looms, the Coalition is quickly ramping up its campaign for a more voluntary super system.
Bragg said bluntly that the opposition’s flagship super for housing is “an attack on preservation because we don’t believe the preservation is appropriate for everyone”.
“The key determinant of your success in retirement is not your superannuation balance – it’s your homeownership status,” he said.
“We’re not saying we’re abolishing compulsion, we’re saying that people should be able to use this for a house. We’re not saying you take it to the pokies.
“I think it’d be a pretty poor election if everyone has the same idea.”
