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‘Stapling’ reform takes effect but concerns over fallout remain – Life Insurance – Insurance News

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The Federal Government’s “stapling” reform, aimed at preventing workers from holding multiple super accounts and paying unnecessary group insurance premiums, commences today.

The change means where an employee has an existing superannuation account, that account will be “stapled” and follows them when they change jobs, a statement from Treasurer Josh Frydenberg and Financial Services Minister Jane Hume said.

“These changes will end the creation of unintended multiple accounts every time individuals change jobs,” the statement said. “Every year around 850,000 duplicate accounts are created.

“Treasury has estimated that stopping the creation of millions of unintended multiple accounts over the next decade will boost balances in super by about $2.8 billion by avoiding duplicate fees and lost returns.”

The stapling measure is a recommendation from the Hayne royal commission’s final report in 2019 to the Government.

But consumer advocates and other stakeholders have voiced concerns the change may lead to some workers, especially those in physically demanding and hazardous occupations, losing out on critical coverage because of occupational exclusions in default insurance products.

The concerns have led Ms Hume to announce in June that Treasury will carry out a review of occupational exclusions. The Financial Services Council also announced last month it aims to introduce an enforceable standard banning occupational exclusions in default group life insurance in superannuation by January 2023.

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Super Consumers Australia says while it welcomes the “stapling” reform, it believes there should be a ban on occupational exclusions found in default life policies.

“The greatest benefit of default insurance is its ability to share risk among a large group of people, so that everyone has access to affordable cover,” Director Xavier O’Halloran said. “A very small number of funds have undermined the value of their cover by carving out certain occupations.

“This creates gaps and weakens the safety net. It’s not in keeping with the needs of people in a modern workforce, who change jobs and industries throughout their careers, but still expect to have a base level of protection.”


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