Alan Doble - Submission to the Super System Review

Super System Review
GPO Box 9827
Melbourne Vic 3001
Dear Sirs
SUBMISSION TO THE SUPER SYSTEM REVIEW – Phase 3 – STRUCTURE
A WAY OF PROVIDING UNIVERSAL LIFE INSURANCE – THROUGH A ‘CLIP’
This submission responds to questions asked in parts 10 and 22 of the Phase Three Issues Paper,
dealing with the Structure of superannuation, including SMSFs.
The Issues Paper asks questions which indicate the inquiry is interested in alternative ways that life
insurance could be provided.
Section 10.4 Other Pooling Ideas is the most explicit section in this regard. It says, “Given
the apparent cost of life and TPD insurance to the superannuation sector as a whole, are there
more radical ways to address the need for super fund members to have life insurance? How
could super funds create sufficient risk pools to be able to underwrite such insurance
themselves?”
This submission directly addresses the first part of that question. It explores a way that a minimum
level of death insurance could be provided as a universal benefit, to all Australians of working age,
whether or not they are members of a superannuation fund. Such cover could be provided quite
efficiently outside of superannuation, as an additional form of social insurance. The pooling
mechanism is described in the attached paper where it is called a Community Life Insurance Pool, or
CLIP.
Section 10.1 Compulsory or voluntary insurance is less explicit, but it is clear from the
discussion that the Enquiry is interested in “the minimum level of cover required in a default fund
(or a universal fund under the choice architecture model)”. Section 10.1 goes on to ask
questions including “should a constant insurance fee be applied with the insured benefit
decreasing with age?” Later still, the section asks “Are there ways that death and TPD insurance
could be provided more cheaply to members?”
As noted above, this submission explores how a minimum level of death insurance could be provided
as a universal benefit, to all Australians of working age, whether or not they are members of a
superannuation fund. The death cover would be an additional form of social insurance. The social
security system already provides a form of disability income benefit to people who are unable to work,
via the disability pension.
Section 22.6 Life Insurance Default addresses another area of superannuation where
compulsory insurance could be considered, namely the SMSF sector. Two of the questions asked are
“Does there need to be an insurance default in the SMSF sector, for example similar to the
minimum insurance cover required for default funds? How could this be achieved?”
The CLIP, or Community Life Insurance Pool, discussed in this submission could meet that aim by
providing death insurance to everyone of working age in Australia, including people who have
arranged their superannuation through an SMSF.

The ideas presented in this submission are not new. They were first made public by the Institute of
Actuaries of Australia in 2002 as part of the Institute’s response to a joint enquiry by the Australian
Law Reform Commission (alrc) and the Australian Health Ethics Committee (AHEC) of the National
Health and Medical Research Council (NHMRC) into the Protection of Human Genetic Information,
under alrc Discussion Paper 66. That enquiry shared an interest of the Cooper enquiry in exploring if
there were ways of making life insurance cover universally available. The Institute’s original
submission is on the public record; it was published in the Australian Actuarial Journal, Volume 8-4.
Pages 791 to 799 of that publication contained the original wording upon which the present
submission is based.
For this submission, the Institute of Actuaries of Australia has kindly granted permission to the author
to use wording taken from the earlier report. Necessary changes have been made to suit the specific
context of the Cooper Enquiry. Where feasible, original wording has been retained. The illustrative
table of life insurance covers has been updated. It is now based on the Australian Life Table 2005-
2007, published in November 2009, whereas the original table was based upon data from ten years
earlier, in ALT 1995-97.
While wording originally published by the Institute of Actuaries of Australia has been used in
developing this submission, I wish to make clear that this is a personal submission. It is not a
submission on behalf of the Institute and does not necessarily represent the views of the Institute.
I believe the attachment is fully self contained, but I would be happy to respond to any questions.
Yours sincerely
Alan W Doble