The Cooper Review of Australian superannuation has proposed significant changes to the delivery of life insurance, aiming to clear up confusion and maximise investor returns.

Among the key recommendations is a ban on commissions paid on insurance products provided through super.

Chaired by former Australian Securities and Investments Commission Deputy Chairman Jeremy Cooper, the review into the governance, efficiency, structure and operation of Australia’s superannuation system says in its final report that commissions on life insurance sold through super “add unnecessarily to the insurance premiums that members pay”.

“In superannuation, insurance is generally automatically provided to members and, consequently, members will continue to have coverage without the need to have advisers remunerated by trailing commissions,” the final report says.

Other proposed insurance reforms include limiting available cover to life, total and permanent disability (TPD) and income protection.

Super fund trustees would be required to develop an insurance management strategy specifying the type of insurance offered and the range of available cover.

Life and TPD insurance would be offered on an opt-out basis by the proposed MySuper default fund, while the definition of TPD in trust deeds would be aligned to the definition in the relevant insurance policy.

Trustees would have a statutory duty to act in the best interests of fund members and clearly disclose insurance information on the fund website.

The Cooper Review report says the changes will allow members to clearly compare insurance policies and access tailored default insurance provisions.

The proposals have found favour with the manufacturers of financial products, but not with the intermediaries who sell them. New Financial Planning Association CEO Mark Rantall told insuranceNEWS.com.au the proposed commission ban risks “throwing the baby out with the bathwater”, and could exacerbate underinsurance by making insurance cover inaccessible to lower-income earners.

The Federal Government is reviewing the report.

See also ANALYSIS.