June 19, 2019
June 19, 2019 | Risk Pulse
It’s time to check - your client’s insurance in super policy may be at risk of cancellation.
New legislation comes into effect from July 1 2019 which is designed to protect the balances of superannuation accounts for members where there has been no contribution or rollover for a period of 6 months or more, therefore deeming it ‘inactive’.
If an account remains ‘inactive’ for 16 consecutive months, the trustee is required to cancel any insurance cover held within that account unless the member has opted in.
Your client’s insurance cover could be cancelled
If your client’s super account is receiving regular contributions their insurance in super won’t be affected by these changes
Although, for inactive members, for cover to remain in place from July 1 2019, they will need to either opt-in or alternatively make a contribution to their account.
How your client can protect their insurance in super
If your client chooses to keep their insurance cover in place, they need to contact their fund before 1 July 2019 and advise them of this decision. This needs to be done in writing of via electronic means – this could be as simple as sending an email, responding to a text message from the fund, or filling in a form on the fund’s website.
Alternatively, if no action is taken the insurance will be cancelled automatically.
What this means for your clients
If their policy is cancelled and they apply for a replacement policy, the new policy will generally be based on their health and other circumstances at that time. A new policy may not cover conditions existing at that time. This could result in your clients not being covered, paying a higher premium or having less comprehensive cover.
Impact on advisers & licensees
If these policies are cancelled, then these will count against your practice and dealer groups lapse rate. This may put an adviser into the ASIC reportable range due to the lapses of client’s policies.
A public awareness campaign - https://timetocheck.com.au/ - has been jointly developed by the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC) on behalf of Australian superannuation funds and life insurers.