Minister for Financial Services Stephen Jones has softened his tone on insufficiencies in trustees’ insurance claims-handling processes, but has stressed it’s “a bit early to claim success” on eliminating delays in insurance claims-handling.
However, he reiterated to the Investment Magazine Insurance in Super Summit (IISS) on Tuesday morning that he did not think he went too hard on funds.
“I want to acknowledge that since the comments I’ve made last year [at Investment Magazine Group Insurance Dialogue] and indeed some of the interventions by the regulator, there has been an uplift,” he told leading super funds, insurers and regulators at IISS.
“In the conversations that I’ve had collectively and individually…with trustees, funds and CEOs, nobody said there’s not a problem here that needs to be fixed.
“But we’ve got to move faster, and we’ve got to do more to ensure that we fix the systemic challenge.”
The comments came after dispute resolution body Australian Financial Complaints Authority (AFCA) similarly said funds have deployed more resources and have been “working hard” to address delays in claims handling.
However, the scale of the problem is still worrying, as there were 1411 complaints related to superannuation group life insurance and 377 related to death benefits distribution in FY23, according to the AFCA Datacube. The numbers were 1488 and 377, respectively, in FY22.
AFCA lead superannuation ombudsman Heather Gray told the IISS that superannuation complaints are expected to have increased by about 3 per cent in 2023-24 when AFCA releases official numbers. She said this follows a significant jump in complaints in 2022-23, and suggests complaints are beginning to plateau.
Jones noted the top issue raised via AFCA complaints in super related to delays in claims handling.
“The impacts of these delays can’t be understated,” Jones said.
“Members making a claim are often experiencing a period of stress and vulnerability as they respond to a significant life episode.”
Jones said members shouldn’t have to be fighting their insurer to “make ends meet”.
“Our frustrations around insurance and super should be the canary in the coal mine for the system around member expectations,” Jones said.
He made clear that group insurance will continue to be an important policy area due to its crucial benefits such as providing Australians with affordable life insurance at scale, especially for those in dangerous professions.
“Members don’t see them [insurance and super] as separate, and they won’t accept their super fund shifting the blame either,” he said.
“For many, insurance is really not front-of-mind…at least not until something goes wrong.
“But in those moments workers expect that the promised financial support will be delivered upon, and that process to receive the support has got to be as simple and as painless as possible.”
As the election deadline approaches, the Labor government is pushing to legislate the objective of super bill which is currently before Senate.
Jones said group insurance is a benefit of the superannuation system and a more effective system will allow for more effective distribution of the product, but insurance is not a part of the super objective.
“The objective of the superannuation system is to deliver retirement income. That’s the way the government was thinking when putting the objective statement into Parliament and moving to legislate it,” he said.
Consumer group Super Consumers Australia has called for a top-to-bottom review of insurance in super, suggesting that the current arrangements around total and permanent disability and income protection insurance do not cater well to the rising incidence of mental health claims.
It also floated the idea of reviewing insurance policies to integrate other systems, such as the National Disability Insurance Scheme (NDIS). But Jones said the NDIS itself has got some fundamental challenges the government needs to fix.
“If we don’t get it right in less than a decade’s time, or actually a much shorter period of time, more fundamental questions need to be asked and as a person and as a representative of the party that established NDIS, we’re not going to let that happen,” he said.
