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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
Technical Partnership Manager
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.
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