The key to informing consumers
"Many life insurance customers think they're covered for more than they actually are, and this stems from confusion and miscommunication during the initial
sales process," says Erin Turner, CHOICE head of Campaigns and Policy. "It's a no-brainer: if you give consumers access to clearer information, they'll be able to make more informed choices."
Key facts sheets are short documents, usually no more than two pages long, containing the most important information about a product in easy-to-understand
language. They're currently issued for products such as home loans, phone plans and private health insurance. Industry guidelines standardise the fact
sheet's design and the types of information it provides. This makes it easier for consumers to access important information about a product, and compare it
with others on the market.
CHOICE has also called for insurers to provide "product scorecards" about their claims handling. These scorecards would include information on the average
value of payouts, claims acceptance rates and the ratio of premiums to payouts. Having this information, and being able to compare one insurer with
another, will help consumers decide whether they want to do business with a particular company.
Duplicate super accounts drain billions from retirement savings
More than half of all superannuation accounts by default come bundled with a life insurance policy. By law these policies are offered on an opt-out basis,
meaning that people who fail to consolidate their super accounts when moving between jobs may be paying for duplicate insurance policies.
More than 6.4 million Australians – 43% of super account holders – have more than one super account, according to the ATO. With annual life insurance
premiums in these accounts costing around $140, CHOICE estimates that up to $1.96 billion may be wasted every year on duplicate life insurance.
to modelling by the Financial System Inquiry, the average person takes a $16,000 hit to their super balance due to costs associated with duplicate
"The confusing and complicated nature of superannuation is leading consumers to waste on average $131 a year, which can leave a huge dent in your retirement income," says Turner. "It's startling to think that by simply dumping your duplicate life insurance policies you could increase your balance at retirement by around $16,000."
What CHOICE wants
CHOICE has recommended that information about a super account's life insurance be included in its product dashboard – similar to a key fact sheet – which
already contains information on the account's investments.
"There is a worrying lack of transparency around default life insurance policies. Consumers shouldn't have to perform complicated mathematical equations to work out how much policies cost," Turner says.
CHOICE encourages consumers to consolidate their superannuation to avoid getting stung with excess fees and premiums.
The parliamentary inquiry will report in June 2017.
Read CHOICE's submission to the inquiry [PDF]