Senator Jane Hume this week praised life insurers for providing a “safety net” for Australians during the COVID-19 pandemic.
Speaking at the FSC’s Life Insurance Summit, the Assistant Minister for Superannuation, Financial Services and Financial Technology said individual insurers had, “stepped up [by] waiving pandemic exclusions and applying flexibility in the underwriting process where they can.”
More broadly, Senator Hume welcomed the industry’s commitment that frontline healthcare workers are able to obtain life insurance. “I also applaud the life insurers who have committed to the FSC’s initiative to ensure that total permanent disability (TPD) policy holders will not have their cover impacted if they lose their job, are stood down or have their hours reduced due to the pandemic,” she added.
Senator Hume’s comments followed the announcement by FSC Chief Executive Sally Loane that the Life Insurers Commitment to Frontline Healthcare Workers and the TPD Claims Initiative had both been extended to 1 January 2021.
Senator Hume identified the increase in TPD claims as one of the “looming crises” faced by the life insurance industry, and discussed how COVID-19 could prompt an increase in mental health related claims.
Reaching the other side
Looking ahead, Senator Hume expressed confidence that the life insurance industry “has the resources available to continue to support customers in need, and will work constructively with the government to get to the other side of this crisis.”
The Senator said she expected the pandemic to impact pricing, which would have flow-on effects for sustainability and affordability. “Events like pandemics can mean that people see an increased perceived value of life insurance, resulting in more requests for new or higher levels of cover. Higher levels of unemployment will likely have impacts on TPD and income protection pricing and the ‘return to work’ process.”
In response to a question from Sally Loane about the sustainability of life insurance companies, Senator Hume replied: "At some point there is going to be a sweet spot between coverage, affordability and sustainability. Having so much coverage within super is a good start but there's more that can be done."
Senator Hume talked at length about the accessibility of insurance and its availability through quality advice. In doing so, she reaffirmed the government’s commitments to FASEA reforms and highlighted the recently-announced extension for advisers to meet exam and education requirements.
Royal Commission reforms
Referring to the Royal Commission recommendations, Senator Hume provided an update on a number of yet-to-be-legislated insurance commitments. She reiterated that “the hawking of insurance products should be prohibited,” and said the definition of ‘unsolicited’ will be clarified in the draft legislation.
The Senator also highlighted the removal of the exemption that prevents insurance claims handling from being a financial service. In future, claims handling will be subject to consumer protection and conduct requirements, with regulatory oversight by ASIC, she said. “In particular, insurers will be explicitly required to handle claims efficiently, honestly and fairly.”
Senator Hume added that government was still considering its response after receiving more than 20 submissions regarding the effects of legislating key definitions, terms and exclusions for default MySuper group life insurance policies.
Finally, the Senator noted Royal Commission recommendations on the Life Insurance Code of Practice. She invited the FSC to engage “with ASIC as soon as practicable – noting the pressures on everyone at the moment – to see that these recommendations are met.”
In her wide-ranging speech, Senator Hume also called out a “piece of fake news I’ve heard repeated too many times” that if a person’s balance falls below $6,000, as result of accessing their superannuation funds during COVID-19, they will be forced to cancel their insurance under the government’s Putting Members’ Interests First changes.
“This simply isn’t true,” she said. “Of course, if an account does not have enough money to pay the premiums on an ongoing basis, then the coverage will not continue. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.”
Individuals need to make their own decisions, said the Senator, while highlighting the importance of clear and effective communication from funds to members. Senator Hume also urged consumers to access ASIC’s MoneySmart website as an important source of truth on insurance and superannuation matters. Senator Hume also urged consumers to access ASIC’s MoneySmart website as an important source of truth on insurance and superannuation matters.
FSC Life Insurance Summit 2020 - The FSC Life Insurance Summit continues this week until Friday 31 July.