The Association of Financial Advisers (AFA) has criticised proposed opt-in arrangements for life cover in superannuation.

In a submission to the Senate committee considering the plans, it warns of a substantial increase in underinsurance and greater reliance upon social security.

While the reforms may lead to an increase in people buying retail life insurance – which the AFA says is a better option than group cover – many people who experience life-changing events will be disadvantaged.

The AFA also questions why the reforms are being “pushed through” when the Productivity Commission is still reviewing default super.

“There are many potential negative consequences that could flow from this package and we caution against it being pushed through without adequate consultation and consideration of the objectives and the likely consequences.”

The AFA acknowledges that some insurance is ineffective, particularly when members have duplicate income protection policies, but it does not believe removing insurance for these members is the best outcome.

It says most young people do not appreciate the value of insurance, and as more people who have family health issues or previous health problems opt in, it will increase the risk pool.

The AFA also questions whether people will drop their insurance in response to an expected increase in premiums.

It urges the Senate committee to hold public hearings, to better understand the implications of the proposed reforms, and hear from super funds, insurers, the Australian Prudential Regulation Authority and independent experts.

Measure to address duplicate accounts will go a long way to solving problems the reforms seek to address, the AFA says.