MySuper members who enjoy the benefits of formula-based insurance should contribute to the cost of administering the structure because it’s often based upon advice provided by a financial adviser.
The Corporate Super Special Alliance (CSSA) has made a submission to the Treasury outlining their concerns about this issue.
“The CSSA believes the current ban of commissions on group insurance within superannuation is flawed, and has possibly been based on a misunderstanding of the structure of group insurance within super,” the submission asserted.
This is because most superannuation funds have implemented their MySuper solution to members by creating another investment option that complies with the MySuper guidelines, and many of these members have existing investments within the same superannuation fund that was based upon advice given to their employer by an adviser.
“In some cases the adviser would have assisted the member to obtain additional insurance or to qualify for levels of insurance that were beyond the fund’s automatic acceptance level,” the submission said. “The adviser would also have negotiated lower premiums and higher levels of automatic acceptance.”
CSSA president Douglas Latto told Wealth Professional
that banning commissions for group insurance and removing advisers from this market segment also results in a lack of advocating on behalf of members, and nobody to negotiate better premiums, term and conditions for them.
This has resulted in a trend towards lawyers representing superannuation fund members at claim time, which will mean higher premiums and longer time period for insurers to settle claims, he said.
“We go out and make sure they get the best offer and benefits. Part of the service is to represent the claimants against the insurer,” he said. “Who is going to represent the guy when he comes to claim now?”
Latto said CSSA believe that group commission should start at a default of 0% payment, with a payment solely for advice provided, services delivered, and only after an employer sign-off.
He believes that resuming the payment of commission on group insurance within superannuation will stabilise the group insurance market by returning it to a ‘level playing field’, discourage churn, reduce insurance costs, and allow ongoing advice and services to members of group policies.