Need to know
- Insurers who provide income protection in super are usually able to reduce a claimant's payment if they are also receiving government benefits
- Some insurers have chosen not to offset the government's JobKeeper payments on income protection claims
- Insurers who are offsetting payments could be profiting from these payments, meant to benefit workers and the economy
Super Consumers Australia director Xavier O'Halloran has called on the industry to rule out insurers profiting from stimulus payments.
"These payments were made by the government to keep people employed and protect the economy, not for insurers to profit by reducing the money they pay out on claims," he says.
A spokesperson for industry body, the Financial Services Council, told Super Consumers Australia that members unsure about how JobKeeper payments impact their income protection claim should contact their super fund or the life insurer behind their policy.
"When Group and Individual Income Protection policy wordings were written, they did not contemplate the existence of the JobKeeper scheme, so whether or not the JobKeeper is considered to be part-time earnings for this purpose will depend on the particular policy wording and the customer's individual circumstances – for example, whether or not the person is actually working and, if so, the number of hours," the spokesperson said.
What is the JobKeeper offset in income protection insurance in super?
In light of COVID-19, the government introduced JobKeeper payments back in March. Around six million Australians were eligible for these benefits when the scheme started.
Millions of Australians have income protection insurance through their super. This type of insurance provides a benefit, usually for up to two years, if you can't work because of an injury or illness.
Generally, income protection insurance payments will be reduced or 'offset' by any other benefits you receive.
For instance, if you receive $1000 from the Newstart Allowance or the Disability Support Pension, this could reduce the amount you get from the insurer by $1000.
Insurers need to ask themselves if they're doing the right thing at this time by banking savings off the back of JobKeeper
Xavier O'Haloran, Super Consumers Australia
While insurers are technically within their rights to enforce these offsets for those receiving JobKeeper payments, there's been debate over whether it's appropriate for them to save money by offsetting government safety net payments in this way.
With some people's incomes reduced to the level of JobKeeper payments, insurers may be making significant savings on income protection insurance claims.
Drew MacRae, policy and advocacy officer at the Financial Rights Legal Centre, says that the centre has been approached by some clients who were confused about whether JobKeeper payments would be offset.
"The principle should be fairness," he says.
Where people on claim are receiving more income due to JobKeeper, MacRae says the amount offset should be their original pre-COVID wage. Otherwise, he says, "the insurer would be gaining more income because of JobKeeper and ultimately benefiting from the government policy, where the intent is to benefit the worker and the economy."
What are different insurers doing about JobKeeper?
Super Consumers Australia contacted all the major insurers who offer life insurance in super. Some of the bigger insurers provide insurance for a number of super funds, but the level of cover they provide may vary from fund to fund.
Several failed to answer.
MetLife was the only insurer to rule out offsetting all JobKeeper payments.
"MetLife Australia is not offsetting the JobKeeper payments on Income Protection claims, in order to support our customers during this challenging time," says James Carey, chief group insurance officer.
Carey says the insurer is waiving the usual leave without pay waiting period for those who had been stood down from work. It has also let employers who provide insurance as a benefit to their employees extend the time they have to pay premiums.
| Insurer | Are they offsetting JobKeeper payments? | Are fund members better off? |
|---|---|---|
| AIA and Comminsure | Some, depending on the individual policy. "In some instances, this will entitle a person to a higher income protection benefit than they would otherwise have received ... Some of our insurance policies will take into account any income a person is receiving, to ensure they are not better off remaining on a disability claim than they would be if they were working." | Sometimes |
| AMP | "If super fund members are eligible to receive an insurance benefit under their income protection cover and their product currently utilises offsets, JobKeeper payments will be offset against income protection payments." | No |
| Hannover Re | No response | ? |
| MetLife | No – the insurer committed not to offset | Yes |
| MLC | No response | ? |
| Onepath | No response | ? |
| Qinsure | No response | ? |
| TAL and Asterton | Some, depending on the insurer's assessment of the claim:"The circumstances and the nature of JobKeeper payments varies considerably amongst out customers ... we consider each of these claims on a case by case basis, which has led in the majority of cases to a decision to not offset JobKeeper payments." | Sometimes |
| Westpac | "We currently offset some ongoing payments ... We continue to review the unique circumstances that arise in relation to JobKeeper. | Sometimes |
What do consumer advocates say?
Xavier O'Halloran, director of Super Consumers Australia, says the issue highlights the variability of insurance offerings across super funds.
"We welcome the leadership of MetLife firmly ruling out reducing people's income protection payments. Other insurers need to ask themselves if they're doing the right thing at this time by banking savings off the back of JobKeeper."
Funds and insurers have too much discretion to offer whatever insurance they see fit
Xavier O'Halloran, Super Consumers Australia
"For consumers, it's just the luck of the draw whether you get defaulted into a fund which offers good value insurance to its members.
"This current example is another instance where quality universal terms that meet community expectations could solve this problem. Without universal terms people can't easily compare insurance offerings. Funds and insurers have too much discretion to offer whatever insurance they see fit."
Super Consumers Australia has previously advocated for universal terms in insurance in super. Treasury has run a consultation, but it has yet to release the findings.
We're on your side
In more than 60 years of making a difference for Australian consumers, we've never taken ads or sponsorship.
Instead we're funded by members who value expert reviews and independent product testing.
With no self-interest behind our advice, you don't just buy smarter, you get the answers that you need.
You know without hesitation what's safe for you and your family.
And you'll never be alone when something goes wrong or a business treats you unfairly.
Learn more about CHOICE membership today
Stock images: Getty, unless otherwise stated.
