Industry funds retain coronavirus exemption clauses in insurance

Aleks Vickovich Wealth Editor Mar 25, 2020 Australian Financial Review

Four industry super funds with combined assets of more than $180 billion have refused to rule out exemptions to insurance cover for pandemic-related death or terminal illness, in a move slammed by consumer advocates.

The Australian Financial Review can reveal that QSuper, Unisuper, NGS Super and TWUSuper each retain pandemic exclusion clauses in the fine print of life insurance policies linked to their members' superannuation accounts.

That could see some investors in the funds left without protection if they die or contract terminal illness as a result of COVID-19 within the first 30 days of cover.

QSuper – Australia's seventh largest super fund with $91 billion in assets as at June 2019 – has a 30-day exclusion period for pandemic-related illness which applies to additional cover taken out by members after March 18.

It also applies to any new members who join by choice after that date, but not to default members, most of whom are employees of the Queensland government.

QSuper's chief of member engagement, Jason Murray, said the clause was necessary to reduce costs for existing members at a difficult time.

"Without a pandemic clause for new non-default members we ran the risk that we would have to increase premiums for everyone who we try to service with economical insurance coverage," Mr Murray said.

"We didn’t believe that was fair and equitable, particularly to those frontline members who are protecting the community."

Unisuper, NGS Super and TWUSuper are each subject to a pandemic exclusion clause by way of arrangements with Australian insurer TAL, a subsidiary of Japanese-listed Dai-Ichi Life.

"Within the group insurance agreements for [the three funds], there is an option to apply pandemic exclusions from a forward date and for new members only joining these group insurance schemes," a TAL spokeswoman confirmed.

TAL has chosen not to "activate" the pandemic exclusion for members of the three industry super funds, and does not have any coronavirus or pandemic exclusions in its individual life policies, the spokeswoman added.

A Unisuper spokeswoman said the decision to apply the clause ultimately rested with TAL.

"From what is currently understood about COVID-19, our insurer has not stated any intention to apply the exclusion," she said.

A subsequent statement from TAL – whose name is taken from the ASX ticker from its previous life as Tower Australia Limited – clarified that "discussions" are under way with "fund partners" which may result in amendments to its pandemic exclusion policies in the future.

TWUSuper chief executive Frank Sandy emphasised that existing members were covered for COVID-19.

"While the fund’s insurer TAL has a pandemic clause, this only applies to any extra cover taken out after a pandemic has been declared by the insurer," he said.

The four funds managed a total of $184 billion at June 2019, according to super sector adviser NMG Consulting. Their pooled assets are likely to have increased since then, given they each enjoy three-year annualised growth rates of between 9 and 17 per cent.

The refusal to rule out invoking a pandemic exclusion in the case of positive COVID-19 members, whether new or existing, is at odds with the decisions of rival funds.

CareSuper, which has a pandemic exclusion in its death and total and permanent disability cover, has chosen to remove the policy after coming to an agreement with its insurer, New York-listed MetLife.

"We are waiving the CareSuper pandemic exclusion clause for any COVID-19 related claims," a MetLife spokeswoman confirmed. "We have notified CareSuper of this and are working with them to support affected policies holders."

Healthcare industry fund HESTA, and its insurer AIA Australia, have also pledged not to invoke the clause for "existing or joining members", as previously reported by the Financial Review.

It is understood AIA also waived the clause for its group insurance with the First Choice fund operated by Colonial First State, a subsidiary of the Commonwealth Bank. AIA purchased the bank's insurance arm in 2019.

The majority of super funds in the $2.9 trillion system do not maintain pandemic exclusions in their insurance policies.

The clauses have drawn the ire of consumer advocacy groups, who argue super funds and insurers should be stepping up to support Australians affected by the deepening health crisis.

"The excuse that these exclusions only apply in limited circumstances isn't good enough," said Xavier O'Hallaron, director of Super Consumers Australia.

"The super funds and insurers may have saved a few dollars on the insurance premiums, but at potential huge cost to some."

Super Consumers Australia, and affiliated group Choice, are calling on all super funds to "remove these unfair terms" from insurance contracts and inform members about the change directly.

The comments come as Treasurer Josh Frydenberg warned super funds they must support "Team Australia" by providing relief for members affected by the crisis.

The federal government has signalled its intention to overhaul elements of the superannuation insurance system after the Hayne inquiry.

Original article here