The consumer advocate made the inquiry recommendation in its 2022/23 pre-budget submission to Treasury, one of six suggestions it hopes the Federal Government will take up.
It also wants Canberra to provide it with long-term funding so that it can continue to advocate in the interest of consumers.
Its submission says the inclusion of default insurance in super remains poorly adapted to the needs of consumers.
It says the Hayne royal commission’s findings and the Productivity Commission’s report in 2019 both highlighted shortfalls in the existing setup.
“The Productivity Commission found that insurance in super can have a significant impact on the retirement balances of people,” the Super Consumers Australia submission said.
“The effects are worse for members on low incomes and those with intermittent labour force attachment, who continue to have premiums deducted from their accounts while not contributing to their super.”
Super Consumers Australia urged the Federal Government to conduct an independent inquiry into insurance in super by the end of the year as recommended by the Productivity Commission’s report released in January 2019.
The inquiry should assess, among other things, whether opt-out insurance is the most efficient and equitable way to assist people in the event of illness or injury, the consumer advocate said.
“As 2022 begins, it is now timely to implement this recommendation.”
Super Consumers Australia also recommended that the Federal Government assign long term funding for it to continue advocating om behalf of Australians.
Without a long-term funding solution flowing from this upcoming budget, it will cease to exist beyond the 2023/24 financial year, the consumer advocate said.
The Federal Government provided Super Consumers Australia with direct funding on a short-term basis for the first time in its 2021/22 budget.
“Our reviews of insurance offerings and fund member outcomes assessments continue to drive direct improvements at super funds and help align their product offerings to the needs of all Australians,” the advocate said.
“It is time to ensure Australian consumers have a permanent place in decision making over the shape of their retirement savings system by establishing a long-term funding solution.”
Click here for the submission.