News Life and Health08 Jun 2018

Australia:Major insurer questions value of proposed life insurance reforms

08 Jun 2018

The country's largest group insurer AIA Australia has said that the government's plan to ban automatic life insurance for young superannuation members ignores the benefits for those making claims, including for mental health issues.

AIA Australia chief executive Damien Mu said Australians would get "limited gains" from proposals outlined in the 8 May federal budget that would see life insurance stripped from those with balances under A$6,000 ($4,600) and inactive accounts, as well as making new members under 25 opt in for cover, reports The Australian Financial Review.

"To say that people under 25 don't need cover and they'll opt in if they need it, that's fairytale stuff. Do I agree with the policy changes being promoted? I am more concerned with the fact that the economic arguments don't stack up," he said.

According to research by actuarial firm Rice Warner and commissioned by AIA, the opt-in insurance model for under 25s would see an individual's retirement balance increase by 0.76% – or A$4,000 – over the course of their working lives.

"This data raises legitimate questions as the value of such reforms," said Mr Mu.

He said the government was also making "incorrect assumptions" about the insurance needs of under 25s.

"More than 600,000 young workers under 25 [work] on a full-time basis which is 42% of the under-25 working population".

He also said, "We have paid A$84 million on 1,200 claims [for under 25s] since 2015 and 23% of those claims were due to mental illness. It's a real issue."

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