The Insurance in Superannuation Working Group says a draft code of practice released last week will help ensure cover provided through super better meets policyholder needs.

The code outlines industry standards and new measures for all classes of insurance paid for via super, including life, total and permanent disability and income protection.

Many people are unaware they hold insurance automatically through super accounts on an opt-out basis, and can overpay for multiple policies across various funds, reducing their expected retirement benefits.

“The draft code contains a suite of new measures to better target insurance offerings, reduce potential for account erosion and improve the member experience at claims time,” working group Chairman Jim Minto said.

Issues considered include the impact of arrangements on low-income earners, young people, those with less secure employment and women.

The working group intends to seek authorisation for the code from the Australian Securities and Investments Commission, and have enforceable arrangements to ensure compliance.

But Consumer group Choice says the code does not go far enough and will entrench poor practices.

“The sector needs to be bolder if it is going to repair the trust lost in recent insurance scandals,” Choice CEO Alan Kirkland said.

Choice criticises provisions that would allow super funds to continue deducting premiums for 13 months after contributions stop being paid. It suggests seven months would provide sufficient time.

It is also concerned about a lack of standard definitions for common types of default insurance.

“Some super funds have been making cover more restrictive, to control costs, and this has led to wide variations in cover across the sector,” Mr Kirkland said.

“We don’t think this is appropriate for a default product and has seen consumers left unsure if they’ll have cover when they need it.”

The working group has called for feedback on the daft before publication of a final version by the end of the year. The code is to apply to all Australian Prudential Regulation Authority-regulated funds that offer insurance from next July 1, with a one-year transition.