The Federal Government’s push to create a simple superannuation fund product – My Super – is an opportunity for life insurers.

AIA Australia CEO Damian Green says the proposal says there has to be insurance cover in the product.

“We believe My Super provides a strong push for insurance,” he told the Financial Services Council conference on the Gold Coast last week. “But there are some elements that could undermine the insurance proposal, including benefits and gap issues.”

Mr Green says the positives are that superannuation trustees must have an insurance strategy in place before launching any product.

“Trustees will have to explain the insurance offering and benefits which will mean they will have to have a depth of understanding,” he said.

But the pressure on providing a low-cost insurance product will be much harder.

“The proposal to impose a single rate is dangerous and misguided,” Mr Green said.

“Differential pricing is important to the pool and delivers cross-benefits.

“There would be a significant number of losers and it would trigger wholesale repricing of risks across the market.”

Mr Green warned chaos would reign if it was applied as there would have to be reviews of other pools such as corporate and industry superannuation funds. 

Advice on insurance was also seen as a fundamental part of the offering, he said, as it is proven this delivers a positive result for the fund member.

Administration issues would be a problem with a low-cost product as a degree of complexity could make the insurance component unviable.

“This could include cover without further underwriting,” he said. “There will have to be further work on the cover and benefits of any low-cost product.”