Insurers including CommInsure have come under the media spotlight recently after withdrawing life cover for military personnel entering war zones – but the reports have not looked closely at insurance law.

CommInsure’s cover was offered under Colonial First State super policies taken out by defence force staff on an individual basis.

The insurance product disclosure statement (PDS) in Colonial’s FirstChoice super product says the fund trustee can change product terms and conditions. Only if the change is material does the fund trustee have to write to insureds.

The PDS also states the insured is not covered for death during an act of war, “declared or not”.

Joining the armed forces would terminate any insurance policy, although insureds can join the reserves.

Group life insurers can change terms and conditions in policies because they are not covered under the Insurance Contracts Act.

Recent moves raise some interesting questions, because the defence personnel were buying super products as individuals but the life component was a group policy.

So, why is an individual product that could be termed as retail sold with a wholesale insurance offering?

If the insurance was arranged individually, the insured would have the protection of the Insurance Contracts Act.

This then brings us into the self-managed super fund (SMSF) debate, in which insurers cannot work out who should be looking after cover for members.

The retail sales people argue it is not their domain because it is a super product, and therefore covered by group life. Group life people argue SMSF trustees are individuals and should be looked after by retail sales.

For a retail super product, it is cheaper to offer group life, thereby making it attractive to potential purchasers of retail super products.

Neither retail super funds nor group life insurance providers have done anything wrong legally, although perhaps it is time to look at the relationships.

Since many retail super products are offered by larger institutions with their own in-house insurers, consumers are getting a good deal, because usually they would have to accept the default option for insurance.

Perhaps it is time to look at offering multiple-choice life insurance for individual super products – just as the investment platforms are now providing.

            – John Wilkinson, Editor, Life+Health insuranceNEWS.com.au