The older membership of self-managed superannuation funds (SMSFs) is one of the reasons for declining life insurance in the sector, according to the latest Australian Tax Office (ATO) data.

The ATO report says the value of SMSF insurance policies in funds was $197 million in September last year. This compared to $190 million in 2010, $219 million in 2009 and $238 million in 2008. 

In 2004 – when the ATO first started keeping data on SMSFs – there were $328 million of life insurance policies.

SMSF Professionals’ Association of Australia CEO Andrea Slattery told insuranceNEWS.com.au there is a large number of fund members now moving into retirement.

“As these members are heading towards retirement, they are reducing or cancelling their life insurance policies,” she said.

“The cost of insurance has also risen so people are adjusting their cover which will also affect the amount of the policies.”

Ms Slattery says the complexity of arranging insurance through superannuation means there are fewer advisers willing to become involved in selling policies.

“There are not a lot of people who understand the complexity of arranging insurance through superannuation,” she said.

“There are taxation issues depending on the type of policy and the structure of ownership that people don’t know about.”

Ms Slattery says the lack of expertise is also affecting the low penetration of life insurance within the SMSF market.

Many accountants advise SMSF trustees, but they are not able to provide life insurance advice unless they hold a financial services licence.

This may change, as the third tranche of the Future of Financial Advice reforms is believed to be looking at licensing accountants that provide financial services advice.

Ms Slattery says the association is looking at improving life insurance expertise among its members.

“SPAA has standards to develop expertise in life insurance for its members and will feature two sessions on the topic at this month annual conference in Sydney,” she said.

“As part of our advocacy, we are pushing to build on advisers holding life insurance competency in the SMSF sector.”

In the latest ATO figures, there were 442,607 SMSF funds with 833,307 members.