Life insurers have urged the Albanese Government to recognise the importance of life insurance as part of the objective of superannuation in a submission to a Treasury consultation.

Treasury launched a paper in February seeking feedback on the benefits, phrasing and implementation of an objective for superannuation – in which millions of Australians hold some form of life insurance.

The Council of Australian Life Insurers (CALI), formed last year to represent the industry, says it supports the plan to legislate the objective of superannuation and has made suggestions that it believes will lead to better outcomes for Australians.

CALI recommends that that the objective of superannuation is “read and understood to recognise the critical role that life insurance in superannuation plays,” the submission says.

The legislated objective should also “ensure that trustees remain empowered to put in place the life insurance arrangements their members need to financially protect them during their working lives and provide adequate financial support to them and their families if that working life is cut short due to disability or death”.

CALI says almost 10 million Australians have life insurance provided through superannuation in the form of death cover, total and permanent disability (TPD) cover and/or income protection (IP) cover.

Recent research by Deloitte Access Economics found that Australians received $6.6 billion in claims paid through superannuation in 2021. These members, who might not have otherwise had cover, had an average sum insured for both death and TPD of about $136,000 and $4000/month for IP.

“For many Australians the life insurance they hold in superannuation is the only life insurance protection that they have,” the CALI submission says.

“Coverage provided through superannuation is extensive and helps to protect people… thus significantly reducing the otherwise catastrophic underinsurance of Australians.”

The Treasury consultation paper says the proposed objective of superannuation is to “preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

CALI says the definition of “preserve” should be extended to include reference to the protection of retirement income and this can be achieved by amending the meaning of “preserve savings” so that it refers to the principle of preservation.

“CALI asserts that life insurance in superannuation is a critical safety net for Australians and their families to provide a dignified and secure retirement; assists in solving for underinsurance of Australians and is for those who are not able to enjoy a full and active working life through to their normal retirement,” the submission says.