Treasury should have examined life insurance when considering the role of superannuation in Australia, according to KPMG.

In a submission to the “objective of super” consultation, the professional services giant says with people working longer a debate is needed on coverage extending beyond age 65.

Some industry super funds offer coverage to 70, but it is not the norm, KPMG Sydney director Richard Watts told insuranceNEWS.com.au.

“There are… issues as cover becomes prohibitively expensive, with reduced cover at quite any early stage,” he said.

“Even looking at traditional cover, value for money becomes questionable.”

Mr Watts says as people work longer, group life cover must evolve.

“Group life needs to be more flexible, and there are questions to be asked about the cost.

“The objective of super has been to provide for retirement, but people still need protection.”

KPMG’s submission says insurance must reflect demographic changes in society.

“It is no longer appropriate that life and disability insurance cover ceases or becomes prohibitively expensive at age 65,” it says.

“Insurance barriers regarding income protection and workers’ compensation coverage for older Australians restrict access to continue in the workforce.

“These issues must be addressed to enable those Australians who wish to, and are able, to work longer.”

Mr Watts says government legislation will push the age of retirement to 67, which raises the question as to why insurance stops at 65.

“There is a demand for a flexible, innovative product,” he said. “It is a challenge for insurers, but they should be looking at cost over a longer period of time.

“Super funds should also be looking at how to engage members beyond their working life.”

In its submission to the consultation, actuary Rice Warner says the omission of an objective for life insurance is significant.

“Many super members will be prevented by death or disablement from working through to retirement age,” it says.

“They will not be able to provide for themselves before and after retirement without the supplement of an insurance benefit.”

Rice Warner wants a group life insurance objective set, to “ensure comfortable retirement incomes even if the member cannot work to retirement”.