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Ensuring insurance works

Ensuring insurance works

By Andrew Proebstl

Practice & Procedure 


A code of practice is being developed to improve insurance offerings within superannuation.


  • There has been widespread concern regarding the quality of insurance offerings within some superannuation funds.
  • There is a clear obligation on super funds to ensure that the insurance policies funds have agreed with insurers on behalf of their members are the most appropriate policies for members.
  • The ISWG has developed a draft Code of Practice to help raise the standard of insurance offerings and service within super.


There has been widespread media coverage in recent times about concerns over the quality of insurance offerings within superannuation.

Questions have been asked and criticisms levelled against insurers about the quality of their products, the price of insurance and the willingness of insurers to “play fair” when it comes to processing and paying insurance claims.

Most superannuation fund members are automatically provided death, total and permanent disability (TPD) and, in some cases, income protection insurance when they join a super fund. This insurance comes from an insurer chosen by your super fund who either provides or underwrites the insurance cover.

There is a clear obligation on super funds to ensure that the insurance policies they have agreed with insurers on behalf of their members are the most appropriate policies for the membership and that if claims are made, members can expect their claims to be processed in a professional and fair manner. Super funds should be confident that claims, when made, will be dealt with fairly and appropriately.

To help improve insurance outcomes for super fund members, in September 2017 the Insurance in Superannuation Working Group (ISWG) released a draft Code of Practice (Code) to apply to superannuation funds that offer insurance.1

The draft code – which outlines a set of industry standards and new measures for all classes of insurance in superannuation including life, death, TPD and income protection – was jointly developed over 10 months by the ISWG with input from insurers, super funds and legal and consumer groups, as well as other stakeholders.

The key measures in the draft code include:

Benefit design

Aimed at ensuring automatic insurance levels are appropriate and affordable for the fund’s membership generally and for certain segments of members – notably younger members, those making low or infrequent contributions and those nearing retirement.

Premium caps

When designing insurance, trustees will be required to consider that the level and cost of cover does not exceed 1 per cent of a person’s salary and 0.5 per cent for members aged under 25 years.

Duplicate insurance cover

Trustees will be required to ask new members for permission to help them identify any other insurance cover held within superannuation, thereby seeking to avoid unnecessary insurance duplication.

Improved communication and better claims handling

Super funds will be required to improve in these areas.

Claims handling response times are to be improved and better information provided to members about claims.

At the time of writing, the ISWG was expected to publish the final Code by the end of 2017 and, as part of this process, to seek ASIC authorisation for the code and to have enforceable arrangements to ensure compliance.

I encourage all members of super funds to review the types and levels of insurance cover they have via their fund and to contact the fund with any questions about the appropriateness, cost and quality of their insurance.


Andrew Proebstl is chief executive of legalsuper, Australia’s super fund for the legal community. He can be contacted on ph 9602 0101 or via

1. The ISWG is comprised of five superannuation bodies: the Association of Superannuation Funds of Australia (ASFA); the Australian Institute of Superannuation Trustees (AIST); the Financial Services Council (FSC); Industry Funds Forum (IFF); and Industry Super Australia (ISA).

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