Insurance Inside Super: What You Need To Know

In recent years, the landscape of insurance within superannuation has undergone significant changes, creating new challenges for financial advisers counselling their clients. As premiums skyrocket and policy definitions tighten, advisers face increasing complexity in delivering value to clients, all while the pool of risk-only specialists continues to shrink. At Mutual Plans, we recognise these challenges and have positioned our paraplanning services to support advisers in navigating this evolving environment.

The Adviser Challenge

Financial advisers are currently caught in a perfect storm when it comes to insurance advice. Research highlighted by Financial Standard shows that insurance within super remains poorly understood by millions of Australians, creating both a challenge and opportunity for advisers. Clients often don’t understand their existing coverage, aren’t aware of recent industry changes, and frequently hold policies that may no longer suit their needs.

This knowledge gap creates significant compliance risks for advisers. When clients don’t understand their coverage until claim time, dissatisfaction and potential complaints can follow, even when the advice was appropriate at the time it was given.

The Changing Insurance Landscape

The Australian life insurance industry has undergone dramatic transformation, particularly from October 2021 onwards. As advisers know, insurers now offer less generous policies across the board, with reduced benefits and tighter restrictions that must be carefully explained to clients:

Income Protection Changes That Impact Your Advice

• Reduced Income Replacement Ratio: The shift to 70% of earnings (with temporary 90% options for initial periods) needs to be clearly communicated, particularly to clients accustomed to the previous 75-80% standards
• Indemnity Value Policies: The elimination of agreed value policies creates particular challenges for clients with variable incomes
• Benefit Period Restrictions: Changes in disability definitions after two years on claim require careful disclosure and explanation
• Pre-Disability Income Calculations: The transition to 12-month income calculations immediately before claims impacts your advice for clients with fluctuating earnings

TPD Insurance Considerations for Advisers

The industry-wide shift toward “Any Occupation” definitions rather than “Own Occupation” creates significant advice considerations, particularly for professionals with specialised skills. Advisers must carefully balance premium costs against the more restrictive definitions when making recommendations.

Trauma Insurance Limitations to Discuss

With super funds no longer able to offer new trauma insurance policies since July 2014, advisers must consider whether to recommend these policies be held outside superannuation, with attendant tax and cashflow implications.

Supporting Your Advice Process

At Mutual Plans, we’ve developed specific services to support advisers facing these challenges.

Compliance-Focused Documentation

We assess insurance advice against compliance requirements, helping ensure recommendations are properly documented and disclosure obligations are met. This is particularly important given the complexity of policy definitions and the significant changes in recent years.

Comprehensive SoA Preparation

Our paraplanning team specialises in preparing detailed Statements of Advice for insurance recommendations, ensuring thorough explanation of policy definitions, changes from previous coverage, and clear articulation of the reasoning behind recommendations.

Partnering with Risk Specialists

Recognising the declining number of risk-only advisers, we’ve established working relationships with specialists in this area. This allows us to connect holistic financial planners with risk experts when needed, ensuring clients receive specialised advice on complex insurance matters without requiring the financial planner to maintain this expertise in-house.

Helping You Demonstrate Value

Perhaps most importantly, our services are designed to help you clearly demonstrate the value of your insurance advice to clients. Through detailed comparison documents, clear explanation of definition differences, and integration with broader financial planning, we help you showcase the critical role you play in protecting your clients’ financial wellbeing.

The Adviser Opportunity

While the insurance landscape presents challenges, it also creates significant opportunities for advisers willing to specialise in this area. The combination of complex products, rising premiums, and widespread consumer confusion creates perfect conditions for advisers to demonstrate their expertise and value.

By partnering with Mutual Plans for your paraplanning needs, you can:

1. Dedicate more time to client-facing activities while we handle the technical research

2. Ensure compliance requirements are thoroughly addressed

3. Provide comprehensive, education-focused documentation that helps clients understand the value of your recommendations

4. Navigate the complexity of modern insurance policies with confidence

Our Commitment to Advisers

At Mutual Plans, we understand that the decline in risk-only advisers creates both challenges and opportunities for financial planners. Our paraplanning services are specifically designed to support advisers in delivering high-quality, compliant insurance advice without requiring in-house specialisation.

By partnering with us, you can confidently navigate the changing insurance landscape, helping ensure your clients have appropriate coverage while demonstrating the ongoing value of your advice relationship.

Contact our team today to discuss how our specialised insurance paraplanning services can support your practice in delivering exceptional value to your clients.