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  • Vulnerable members at risk of losing insurance cover


    Federal Budget Changes

    In May after the Federal Budget announcement you may have seen that AIA released new research to highlight the limited financial gains young Australians would receive under the ‘Protecting your Superannuation Package’, which would also leave more than 1.4 million young people under 25 without much needed financial protection. You can read the full report here.

    The Rice Warner research, commissioned by AIA, has shown that an opt-in insurance model for members under 25 would not address the unnecessary erosion of superannuation balances, with an individual’s retirement balance to increase by just $1,400[1] or 0.27% over the course of their working life. This is an unacceptable outcome, even before we consider the impact of millions of Australians being without financial protections in the event of serious injury, illness or death.

    Tom Gordon

    Tom Gordon

    Technical Partnership Manager

    Other high level findings of the report

    • The measures targeting under 25s don’t materially address the erosion of superannuation balances.
    • The reforms will cost the Government and Australian economy $2.46 billion annually. The Government will also only experience marginal tax revenue gains of just $29.9 million each year.
    • There are significant sustainability risks to the group insurance system.
    • Some members will be shut out of the group insurance system.
    • Potential impacts to cover for up to 7 million Australians – almost half of all who are currently insured.

    Young members do have insurance needs and do claim

    AIA Australia paid $84 million on 1,200 claims for members under 25 since 2015, with the rate of Income Protection (IP) and Total and Permanent Disability (TPD) claims approximately the same for people aged 20 and those aged 30. Mental health is also the largest reason for claims for under 25s group TPD, representing one in four of all claims; and is the third largest claim cause for IP for under 25s. 

    Members with active but low balance superannuation accounts do have insurance needs, with more than $75 million in claims paid by AIA Australia to these members in 2017.

    Protection for working Australians

    We remain concerned about the removal of coverage for members who are active but with low balances – a group that do have insurance needs, with more than $75 million in claims paid by AIA to these members in 2017. We do not believe the Government should remove protection for active, working Australians, nor distinguish between active members due to age or account balance as they have similar needs.

    The Productivity Commission’s recent ‘Superannuation: Assessing Efficiency and Competitiveness’ report labelled duplicate insurance but we strongly believe the Government can achieve this by mandating some of the measures outlined in the Insurance in Superannuation Working Group Voluntary Code of Practice.

    We will continue to lobby Government, including our appearance at the Senate Economics Legislative Committee hearing on 20th July – and remain hopeful that sensible changes, which include extending the transition timeframe, are made to the proposed reforms. The Committee is expected to report by 13th August. and we'll keep you updated.

    You can read AIA’s submission to the Committee here. For more information contact Tom Gordon tom.gordon@aia.com or speak to your Client Development Manager.


    [1] In today’s dollars

    Contact AIA

    1800 333 613

    PO Box 6111
    Melbourne VIC 3004

    infohub@aia.com

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    PO Box 6111
    Melbourne VIC 3004

    infohub@aia.com

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    Copyright © 2021. AIA Group Limited and its subsidiaries or affiliates. All rights reserved. Priority Protection and Priority Protection for Platform Investors products are issued by AIA Australia Limited (ABN 79 004 837 861, AFSL 230043). AIA Vitality, a personalised, science-backed program that supports members every day to make healthier choices, is available with eligible products issued by AIA Australia. AIA Health with AIA Vitality is issued by AIA Health Insurance Pty Ltd ABN 32 611 323 034, a registered private health insurer governed by the Private Health Insurance Act 2207, Private Health Insurance Rules 2007 and the AIA Health Insurance Pty Ltd Fund Rules. The information on this website is current as at 1 April 2021 and may be subject to change. It is general information only and is not intended in any way to be financial, legal, tax, health, medical, nutritional or other advice. You should consider your own personal circumstances and needs and view the relevant product documents, fact sheets, fund rules and terms and conditions before making a decision to acquire such products. If necessary you should obtain professional advice from a financial, tax, medical or health professional. Unless expressly stated, any views or expressions of opinion (including any video content) do not represent the opinion of AIA.
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