Life insurance parasite demands its super subsidy

By Leith van Onselen

The Productivity Commission’s (PC) landmark 500-plus page draft report on Australia’s $2.6 trillion superannuation industry explicitly recommended abolishing compulsory life insurance for people aged under-25:

Current settings are more a function of history than considered policy design.

…many entrenched problems remain (and insurance accounts for over a third of member complaints against their fund)… Particularly for young workers — either with no dependents (in the case of life insurance) or low incomes (in the case of income protection) — insurance is poor value and does not meet their needs…

Additional actions are required to weed out poor value policies — insurance should only be provided on an opt-in basis to members under 25, and cover should cease for all members on inactive accounts after 13 months, unless the member explicitly chooses otherwise.

Today, the CEO of Life insurance giant AIA has set a letter to senators lobbying them to vote down a Bill that would implement the PC’s recommendations to make life insurance voluntary for under-25s:

“By removing default cover from the young and those with low balances, the government is creating an insurance underclass that will have serious social and economic consequences”…

“Everybody should have equal access to a safety net of insurance cover, without discrimination on the basis of age, occupation or wealth”…

This reads as shameless special pleading, since making under-25s opt in for life insurance means less premiums accruing to industry.

Hopefully the Senate takes a common sense view and backs the PC’s sensible recommendation.

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Leith van Onselen

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