The Insurance in Superannuation Working Group (ISWG) has released the Insurance in Superannuation Voluntary Code of Practice for superannuation trustees.
The Code will come into effect from 1 July 2018.
It sets up a framework and standards designed to ensure fund members who cease contributions are not charged fees for unneeded or excessive life insurance cover as well as guidelines for cessation of cover notifications and simpler and clearer processes for fund members to opt out of automatic life insurance.
- income protection cover will automatically cease 13 months from the date of a member’s last eligible contribution, unless they advise the fund they wish to keep this cover;
- death and total and permanent disability cover will cease if a member is likely to have an account balance of less than $6,000 13 months from the date of their last eligible contribution, unless they advise the fund they wish to keep this cover.
The Code covers the following insurance products provided by superannuation funds:
a) death cover, which pays on the death of an insured member, or if they are diagnosed as terminally ill with a life expectancy less than a specified period (generally 12 or 24 months);
b) total and permanent disability (TPD) cover, which pays if an insured member becomes disabled and is unable or unlikely to ever work again, or unable or unlikely to look after themselves ever again;
c) income protection cover, which is designed to provide a replacement income of a specified amount for members who are unable to work due to illness or injury. Depending on the policy, payments may continue up to a specified age if the disability is ongoing or permanent, or may be payable for a specified maximum period.
The Code does not cover insurance products held outside superannuation funds, including health insurance products issued by health insurers.
Compliance with the Code will not be monitored by an external administrator.