Industry super advocates have welcomed the passing of a bill that has made insurance in super opt-in for under 25s and those with low balance accounts.

The changes will take effect from April 1 next year.

The bill – which passed the Senate last Thursday – was the Government’s second attempt to make insurance opt-in for low balance accounts. The first bill passed in February last year after it was amended under pressure from The Greens to scrap insurance for inactive accounts.

Industry Super Australia (ISA) applauded the bill’s passage and its “more realistic” implementation dates, but it says a targeted exemption to keep insurance opt-out for workers in dangerous jobs may be unworkable.

The exemption will allow super trustees to elect to keep insurance on an opt-out basis for members working in the top 20% of dangerous occupations, such as police, firefighters, or ambulance workers. ISA says this depends on members supplying detailed information about their occupations and is not realistic in practice.

It wants the Government to allow super funds to obtain occupation data from the Australian Taxation Office. Australian Prudential Regulation Authority guidance will also be needed to make it work.

Super Consumers Australia welcomed the “end to the blunt one-size fits all approach to insurance in super”.

“Today is a great day for superannuation consumers,” Acting Director Xavier O’Halloran said.

“Millions will flow back into the hands of people rather than being eaten away by insurance premiums for policies people didn't want, need, or even know they had.”

Funds need to do a much better job of communicating how insurance products might meet their members’ needs, not to scare them into “taking up worthless cover”, he says. Super Consumers earlier accused life insurers of using “emotional blackmail” to dissuade senators from voting for the bill.

Writing on behalf of the Financial Rights Legal Centre, Financial Counselling Australia and the Consumer Action Law Centre, Mr O’Halloran accuses trustees of poor and misleading communication over the changes passed last year.

Trustees didn’t disclose the relevant premium cost and benefit of removing insurance from inactive accounts, failed to tell them they would still be able to claim on an event that occurred while the policy was active, and tried to overwhelm members with spreadsheets and data.

Trustees need to take the opportunity that this bill presents and improve the way they are communicating with members, Mr O’Halloran said.

The laws also banned exit fees and excessive fees on low balance accounts, which will save more than $500 million in its first year.