Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

by leave—I move amendments (1) to (16) on sheet TW114 together:

(1) Schedule 1, item 1, page 3 (line 15), omit "1 July 2019", substitute "1 November 2019".

(2) Schedule 1, item 1, page 4 (after line 13), at the end of subsection 68AAB(4), add:

; or (e) a member to whom the dangerous occupation exception applies (see section 68AAF).

(3) Schedule 1, item 1, page 5 (after line 29), at the end of subsection 68AAC(4), add:

; or (e) a member to whom the dangerous occupation exception applies (see section 68AAF).

(4) Schedule 1, page 5 (after line 35), after item 3, insert:

3A After section 68AAE

Insert:

68AAF Dangerous occupation exception

(1) The dangerous occupation exception applies to a member of a regulated superannuation fund to, or in respect of, whom a benefit is provided by the fund under a choice product or MySuper product held by the member by taking out or maintaining insurance if:

(a) the trustee or trustees of the fund make an election under this section that members holding that product will be covered by a dangerous occupation exception if they are employed in an occupation specified in the election; and

(b) the election is in force; and

(c) the member is employed in an occupation specified in the election; and

(d) it is reasonable to expect that some or all of the contributions paid into the product will be paid in respect of that employment.

(2) The trustee, or trustees, of a regulated superannuation fund may elect that members holding a choice product or MySuper product specified in the election are covered by a dangerous occupation exception if they are employed in an occupation specified in the election and either:

(a) a Fellow of the Institute of Actuaries of Australia has certified that:

  (i) based on rates of death, or death and total and permanent disability; and

  (ii) using information from the most recent 5 years in relation to Australian occupations;

the occupation is in the riskiest quintile of Australian occupations; or

(b) the occupation is as an emergency services worker (as defined for the purposes of the Work Health and Safety Act 2011).

(3) The election must be made in writing.

(4) The election is in force during the period:

(a) beginning on the day on which a copy of the election is given to APRA; and

  (b) ending on the day on which the trustee, or the trustees, of the fund give APRA notice in writing that the election is withdrawn.

(5) As soon as practicable after the election is made, a copy of the election must be:

(a) published on the trustee's, or each trustee's, website; and

(b) given to APRA.

(6) Within 28 days of the dangerous occupation exception applying to a member of the fund, the trustee or trustees must give the member:

(a) a notice in writing stating that the trustee or trustees have elected to treat the member's occupation as a dangerous occupation, and are providing the benefit under the choice product or MySuper product by taking out or maintaining insurance; and

(b) details of the annual cost to the member of providing the benefit under the choice product or MySuper product by taking out or maintaining insurance; and

(c) details of how the member may elect to have the benefit cease.

(7) To avoid doubt, nothing in this section affects the obligations of a trustee under the covenants referred to in section 52, or of a director of a corporate trustee under the covenants referred to in section 52A.

Note: For example, under paragraph 52(7) (c) each trustee is subject to a covenant to only offer or acquire insurance of a particular kind, or at a particular level, if the cost of the insurance does not inappropriately erode the retirement income of beneficiaries.

  (5) Schedule 1, item 8, page 7 (lines 5 and 6), omit "1 October 2019", substitute "1 February 2020".

  (6) Schedule 1, item 8, page 7 (line 7), omit "1July 2019", substitute "1November 2019".

  (7) Schedule 1, item 8, page 7 (line 11), omit "1 July 2019", substitute "1 November 2019".

  (8) Schedule 1, item 8, page 7 (line 14), omit "1 August 2019", substitute "1 December 2019".

  (9) Schedule 1, item 8, page 7 (line 18), omit "1 October 2019", substitute "1 February 2020".

  (10) Schedule 1, item 8, page 7 (line 23), omit "1 July 2019", substitute "1 November 2019".

  (11) Schedule 1, item 8, page 8 (line 9), omit "1 July 2019", substitute "1 November 2019".

  (12) Schedule 1, item 8, page 8 (line 20), omit "1July 2019", substitute "1November 2019".

  (13) Schedule 1, item 8, page 8 (line 24), omit "1 July 2019", substitute "1 November 2019".

  (14) Schedule 1, item 8, page 8 (line 27), omit "1 October 2019", substitute "1 February 2020".

  (15) Schedule 1, item 8, page 8 (line 30), omit "1 July 2019", substitute "1 November 2019".

  (16) Schedule 1, item 9, page 9 (line 13), omit "1 October 2019", substitute "1 February 2020".

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

I want firstly to ask the minister what their official definition is for a 'dangerous occupation'.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

A dangerous occupation is defined as a top-quintile occupation according to actuarial data or WorkSafe data.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

'Top quintile'—so a top 20 per cent occupation—but in your response what kind of occupation did you mean? Are you talking about workplace incidents within various occupations? Could you be a bit more specific.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

A top-quintile occupation, as in an emergency services worker, is as defined in the Work Health and Safety Act, or it is an occupation certified by a Fellow of the Institute of Actuaries of Australia to be a top-quintile risky occupation, based on rates of death, or death and total permanent disability, and that's using information from five years in relation to Australian occupations.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I wish to ask a question of the minister. It strikes me that the amendment that you propose assumes that trustees will have complete information about individual fund members, their occupation and, therefore, the associated occupational risks. It is my understanding that that is not actually the case and the funds will only have the information that the employers give them, by law, which requires the employer to provide the worker's name, date of birth and address. Funds are able to supplement that, but that would be time consuming and imperfect. What is your expectation in how funds will obtain the necessary information to make the assessment that's imagined in the amendment you propose?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The trustees can access the information through the Actuaries Institute of Australia or through WorkSafe data, which is publicly available or, alternatively, they can have an actuarial certified list of risky occupations.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I understand, based on your answers to Senator Whish-Wilson, how the occupations are to be established. I guess it is the relationship between individual members and this occupational list. I'm trying to understand, in practical terms, what a fund will do to establish that relationship and that connection for each of the members of their fund?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Funds can choose to use that exception and they can ask members what their occupation is.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Are there any provisions in the amendment that you propose that place any obligations on employers to provide information to funds when requested? You would imagine that this is another feature similar to protecting members' interests arrangements, where funds are required to individually contact members and obtain additional information?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

It is part of a trustee's duty.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I'm interested in whether you think this is actually workable. I suppose informal feedback would be (a) there's a lack of clarity about what's imagined here and (b) some concern that it may not be workable because the administrative impediments to obtaining individualised information about every fund member of the kind that you anticipate are really so burdensome that these exceptions will never actually be able to be practically utilised.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

We have feedback to us that this is a workable solution.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) | Link to this | Hansard source

by leave—I move Pauline Hanson's One Nation's amendments (1) to (4) on sheet 8766 together. These are amendments to the government's amendments on sheet TW114.

(1) Amendment (5), omit "February", substitute "April".

(2) Amendment (9), omit "February", substitute "April".

(3) Amendment (14), omit "February", substitute "April".

(4) Amendment (16), omit "February", substitute "April".

The reason we're doing this is it gives organisations more time to comply. This is important legislation to the workers and it shouldn't be rushed.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Could I ask why high-risk occupations were targeted in this amendment in the first place? Is the government satisfied that, because you work in a high-risk occupation, you're more likely to be injured, permanently disabled or killed outside of your workplace? The issue we're dealing with here actually fundamentally is the default life insurance is needed for workers outside of their workplace. They're covered during their hours of work in their workplace by a different set of protections. Is there some kind of study that shows that those in higher risk occupations are more likely to die on weekends or outside of their work hours and workplace?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Senator Whish-Wilson, there isn't a study that I'm aware of. The government has introduced these amendments because it's listened to concerns raised by industry and representatives that individuals in high-risk occupations are likely to benefit from default insurance and superannuation as they may face barriers accessing insurance elsewhere. The government has therefore decided to make available an exception to the opt-in changes for members in dangerous occupations who are under 25 years old or who have a low-balance account where the trustees elect to apply it.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Thank you, Minister. I appreciate you're busy, and nor are you likely to look at the detail of my speech on the second reading debate, but the Greens did go to some lengths to try and get the issue of insurance payouts that we're dealing with here today quantified for these cohorts—for the under-25s and the under $6,000. The PBO costing that we got, which I hope you're aware of, assuming the bill passes unamended, would see 25-year-olds and people with low account balances missing out on up to $5.8 billion in payments over 10 years. The PBO was able to get the actuarial data showing that there have been payouts of $5.8 billion. We quantified that as a simple average of $600 million a year. Firstly, do you think that's a reasonable estimate of the at-risk cohort here? In other words, young Australians and low-income Australians are going to miss out on the safety net that John Howard brought in to provide them with. And, secondly, have you applied any kind of analysis across historic payments to determine how many of those payments were made to workers in so-called high-risk occupations and how many were made to workers outside high-risk occupations?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I recognise the numbers you have from the PBO; however, there are billions of dollars being paid every year in insurance premiums by those under 25 or those with balances below $6,000 for insurances that they don't know they have, that they don't necessarily need and that often they can't claim on.

The second part of your question was whether we have any data. The Productivity Commission has recognised that insurance is not necessarily good value for those that are young and have low balances. Indeed, Rice Warner, the actuaries, had some data to demonstrate that particularly young women, when they pay their insurance premiums, are often paying 330 per cent of the value that they get from those insurances.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

That wasn't my question, with all respect, Minister. That's the other side of the equation, which I'm happy to deal with and ask you questions on whether you think young Australians and low-income Australians are getting value for money out of this system. I appreciate that's what you're focusing on. But my question is very important. The PBO has quantified for us that $600 million a year of payouts occur in this country to this cohort of vulnerable Australians. Do you agree that's a reasonable quantification? Has the Treasury done any of their own analysis on these payouts? Given we were able to get this kind of data, and what we're dealing with is amendments for a high-risk cohort to stay in this pooled system, what does the data tell us about so-called lower-risk occupations? Surely we should be able to look at the history of payouts under this scheme and determine whether, indeed, it's efficient and necessary to be carving out a high-risk cohort?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I should emphasise here that there's absolutely nothing stopping someone who takes risks outside of work from getting life insurance and that anybody who wants life insurance can have life insurance. This is simply an opt-in mechanism rather than an opt-out mechanism. Anyone can still get group insurance through their superannuation. I point out to the senator again that both the Productivity Commission and Rice Warner have said that there is low value for insurance for people in this cohort.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Minister, I understand that the political pragmatic reality of this place is that sometimes the government has to cut deals to get their legislation through here. But I urge you to consider sending this off to the committee to get this properly looked at, because I know it is going to be very difficult to administer these amendments. There are considerable uncertainties around whether the data even exists to carve out high-risk cohorts. More importantly, uncertainties exist about whether that is the right thing to be doing, considering that, according to your own benchmark, four-fifths of this cohort won't have default insurance. The royal commission into financial services has taught us all that Australians aren't financially literate. I bet there are plenty of senators in here who are not financially literate either and don't actually make those choices the way you might describe the perfect free market with perfect information. The biggest problem we face is getting people more active—you understand this yourself with your background—and getting people to spend more time thinking about these things and making those informed choices. We can't assume that this cohort are going to make an informed choice to opt in. History tells us that. It's an absolutely black-and-white fact that we need to consider.

Even assuming that young people do make the decision to opt in, I want to pull you up on your statement there that insurance is available to all this cohort. I did read into my speech on the second reading that we have received information that there is no guarantee that some of this cohort will have access to life insurance or permanent disability insurance outside their workplace. Insurance companies themselves have said that they will have to go through their underwriting processes. At the moment you have it. It is part of a safety net that was set up by your government, the Liberal government, years ago to protect vulnerable Australians. Can you assure the chamber today that there is a guarantee that young Australians who are excluded when the default system changes are actually going to get coverage when they apply to an insurance company? Can you guarantee that to the Senate here today? Because that is the current position: you are guaranteed a safety net right now. Are you going to be guaranteed that following this legislation today?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The government is not aware of any evidence that would suggest that it would be harder for members to get default cover once they turn 25 or their balance reaches $6,000. In fact, some funds already offer insurance at similar trigger points without the need for underwriting. The government doesn't anticipate that the terms on which insurance will be provided to people once they turn 25 will be materially different from the current arrangements. Certainly it is the case at AustralianSuper, which was the fund that kicked off this process. However, the government will monitor the implementation of these changes and will consider the need for further actions should trustees' actions not provide people with appropriate insurance in the future. I should remind Senator Whish-Wilson that these measures and this bill have already been examined by the Senate Economics Legislation Committee, not once but twice. It was originally examined as part of the protecting your super package last year, including at public hearings, and again earlier this year as part of this particular bill. Both times the committee recommended the Senate pass the measures.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Having been a previous member of that committee, I am aware that this has been through an inquiry. But my understanding is that this point was raised repeatedly during the committee inquiry and hasn't been addressed in this legislation. I would very briefly read to you the legal advice the Greens got:

Trustees will carefully need to consider their obligations under the insurance covenants to determine whether it is permissible for those members who would like to opt in to be included in the same pool as those who are automatically opted in. Furthermore, trustees will need to determine whether those members who choose to opt in are permitted to do so under the terms of the group insurance policy negotiated between the fund and the insurer. For example, the cost of the policy to the fund may increase as a result of select members opting in. The trustee would need to determine whether this is consistent with the obligations under the insurance covenants. Where the trustee determines that it is not appropriate, different group insurance policies may need to be negotiated or, alternatively, insurers may require policies to be individually evaluated and underwritten.

This point was raised during the committee inquiry, and I still haven't got any sense as to whether there's a guarantee that people who are currently insured who are vulnerable—the most vulnerable cohort in this country—under a safety net set up by your previous government, the Howard government, are going to be guaranteed to be able to get coverage. Perhaps if Senator McAllister doesn't ask it, I'd also like to know what kinds of projections you have around the increased cost of coverage once this scheme is changed.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Members under 25 are more likely to receive little or no value from default insurance policies through superannuation. That's what the Productivity Commission found. In fact, Rice Warner research indicated that those under 25 are paying up to 500 per cent of the true premium. That's what we're trying to protect people from. The government's changes will better safeguard Australians superannuation savings from the excessive erosion that can occur as a result of insurance premiums for inappropriate cover. We will also monitor the way this legislation is implemented.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Minister, I asked you earlier about the capacity for funds to discharge the obligation to obtain information under the scheme as you propose in the amendments. I asked you about it in the capacity that you will obtain information. Can I ask you to contemplate a scenario where a trustee makes a decision not to bring an individual member into group insurance on an opt-out basis, and they make that decision based on erroneous information that they hold about that person's risk profile? Is that trustee then vulnerable to legal action from a dependent who subsequently finds themselves without any benefit in the event of a death?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

We haven't quite on that issue, and, according to information from ASIC, no.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

May I ask you to reiterate that answer: according to information from whom?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The information was sought—that very question was asked informally. I haven't got it in writing officially from ASIC, but, yes, they have said that in their opinion there is little—no—chance of that happening.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Does that not strike you as a problem for individuals who might be incorrectly excluded from insurance? I think the intent of the government amendments is to deal with the very real problems that have been presented around this scheme as they relate to people in high-risk occupations. I think that the government's amendments acknowledge that people in high-risk occupations ought to be covered by group insurance and seek to provide a pathway by which, under certain circumstances, trustees may bring this circumstance about. The whole point of that is to protect a cohort of people who are in high-risk occupations and who risk either having financial detriment arising from some accident or injury to themselves or having independents who are unable to support themselves in the event of a tragedy. If that's the objective, are you not concerned that individual trustees may find themselves making assessments about individual risk profiles without adequate information and, on your advice, will suffer no legal consequence if they make a mistake?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The aim of the government's amendments was to put a bright line marker on what was and what wasn't a risky occupation. I understand that Labor would have preferred an amendment that included entire industries. Unfortunately, with that, that didn't identify what a high-risk occupation was and what a high-risk occupation wasn't, so you would have found that a receptionist at a construction firm would have been included as a high-risk occupation, whereas it's those kinds of people who are exactly the ones we're trying to protect with this legislation.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

With respect, I wasn't asking what you consider to be the shortcomings of what you believe to be the Labor approach. I was asking about the shortcomings in the scheme that you're outlining in the amendments that are before us today. So I ask again: if you're intent is to make sure that trustees do include people in high-risk occupations in group insurance on an opt-out basis, are you not concerned that, on your own advice just now to the Senate, there are no legal consequences if they fail to do that or if they make a set of decisions on incomplete or inadequate information?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

What we have done with this amendment is consult with industry and ask them exactly what it is that they need. They have said that this is an adequate amendment and that they can implement this amendment.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

With respect, Minister, I suppose we are receiving different advice, which is that there are real impediments to trustees obtaining the necessary information to make the decisions as imagined in your scheme. I'm asking you whether you have any concerns about that. I know that you've worked in the sector; you often make that point in debates about superannuation. It just strikes me that what you've established is an arrangement where funds are already writing letters to one cohort of people and trying to get them to write back and opt in. We all know how difficult it is to get anybody to engage, on a paper basis, with questions about long-range financial planning. That's not an optimal set of relationships between trustees and their members. On top of that, you've now established a circumstance where the only way that a trustee may ensure that a group of vulnerable workers are provided with group insurance is, by your evidence, to individually write to them and ask them about their occupation so that can then be matched up against some set of categories that has been established elsewhere. It seems a very clunky way to proceed, and the advice to Labor from many of the stakeholders we are speaking to is that it will present real impediments—that this is going to be very difficult to implement and will not provide the sorts of protections that you assert it will provide for vulnerable people.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you, Senator McAllister. As you would know, trustees of superannuation funds have a best interests duty; they have to know their members. This is rather basic information. We would expect that trustees, if they were adhering to their best interests duty, would seek this sort of information from their members as a matter of course. It's extraordinary that trustees, potentially, have been extracting insurance premiums from these members for products that they, potentially, don't need or don't want without this being a problem. I would imagine this will be something that will, in fact, allow trustees to get a better idea of exactly who their members are.

David Fawcett (SA, Liberal Party) | Link to this | Hansard source

Does any other senator wish the call, or shall the question be put?

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

If we are moving now to deal with the amendment from Senator Roberts, I should indicate that Labor supports the amendment. It will ensure that workers in four different high-risk industries are able to be covered by default insurance. We would like to see further amendment to ensure that coverage can be extended to workers in other high-risk industries, but we will be supporting the One Nation amendment.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

I want to come back to the PBO costing the Greens had, which suggested that, if the bill went through unamended, $600 million per annum would be denied in payouts to this most vulnerable cohort. They're real numbers that the PBO has been able to obtain from industry sources. Minister, does $600 million per annum—nearly $6 billion over 10 years—strike you as a lot of payments? You mentioned in your statement that many young people or low-income people who are paying these fees don't need this cover. Does $600 million per annum on average suggest to you that there are many in this vulnerable cohort who do need this insurance cover? What do you say to that historical data that suggests this is actually an important safety net?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The government's concern is about the billions of dollars that these young people and people with low superannuation balances are having eroded from their superannuation accounts every single year for insurances that they may not know that they have, that they probably don't need and that they may not be able to claim on. That's what we're trying to deal with here.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

That may be the case, but, clearly, the death of an individual, regardless of what occupation—whether it is high risk or in the four-fifths of this cohort who won't have any cover under this amendment—and especially if they have dependants, is a tragedy.

The Productivity Commission figures were a long-term projection, looking at weighted data across 15 or 20 years of estimates. I know you understand why insurance is necessary, why a pooled-risk system is necessary and why insurance actually developed; it's for this very reason. But do you accept the reason we have a pooled-risk system and the reason your government set this up in the first place? I remind the chamber again that it was Mr Howard who felt it was necessary to have a safety net in place for the most vulnerable cohort. Do you accept that you are kind of turning your back on the entire premise of why we need a pooled-risk system in this country?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you for the question. The aim of this legislation is to ensure that those who are the most vulnerable, who are young and who do have low balances, are not essentially subsidising those people who do need insurance, who are older and who are far more likely to claim. In fact, this legislation is going to save an estimated $3 billion in insurance premiums in the first 12 months alone for around five million individuals. While I understand that one death is always one death too many, this is going to save millions of people billions of dollars.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

But insurance is obviously one of those things where it's easy to say you don't need it until you need it. Nobody knows what the future holds. Clearly, $600 million per annum in payouts to vulnerable cohorts around this country is a significant amount of money. I'm just considering the corporate knowledge and the history of this legislation coming back to this chamber. It was only a few months ago that the Greens had this carved out in an agreement with your government to pass more broad super reforms, which I think we all agree were a good thing to do. We were very concerned about the loss of the safety net for some of Australia's most vulnerable people.

Why hasn't the Treasury looked at the data, or why can't you provide it today? Similar to the PBO costing that we've had, why can't your government substantiate what the payouts have been to vulnerable Australians under this scheme? Or can you?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you, Senator Whish-Wilson. I remind you again that, according to the Productivity Commission, on average insurance premiums of around $340 per annum per person over their lifetime will be saved from this measure. Rice Warner said that premiums were at around 500 per cent of the value they in fact offer. We agree that group insurance has some value and that group insurance is based on a theory of cross-subsidisation. Some cross-subsidisation of course is necessary. But we are trying to protect the most vulnerable young people from unfair terms which exist at the moment and to protect those who are having their balances eroded away.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

This is probably more just a comment from me: you haven't been able to answer my question, Minister, so I just want to get on the record that I have to assume you don't have that data and nor has Treasury even bothered to look. It's a surprise: $600 million is a lot of money to pay out to vulnerable Australians. In other words, people—the cohort that we're excluding—are using this permanent disability protection cover life insurance. It's working and I would have thought that's a significant number in terms of the payout to people who are actually benefiting from this system.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Minister, I have been pursuing a line of questioning around the information available to funds. I do maintain that it is impractical for funds to individually write to members and seek information about occupations, not least because people's occupational profile changes with some regularity and it seems a rather clunky way to implement the government's intent. Did the government give consideration to allowing funds to access ATO occupational data? There are already arrangements for funds to interact with the ATO to obtain information about their members as part of SuperMatch, and I just wonder whether you gave any thought to ATO data being provided to allow funds to implement the arrangements set out in your amendment.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

No.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

You seem strangely indifferent to the practical problems that I'm presenting. Labor agrees with the intent of the legislation. We are concerned that there are some likely-to-be-unintended consequences of the government's approach. We've been constructively engaging, I think, to try to address those unintended consequences. This seems to be quite a big one. The government has acknowledged that high-risk occupations are a problem. I am saying to you that I think a process where individual letters are sent out to members to obtain data about their occupation so that they can meet this test just seems overly burdensome and cumbersome, particularly where there is an existing dataset held by the ATO.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

It's entirely up to trustees whether or not they use this exception. They must act reasonably, as you would understand, based on the information that is available to them. They can simply ask their members, and it's up to the members to provide the information. Some funds are already doing this. They already have this information.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

You made specific mention of acting reasonably. Could you just clarify what you mean by that.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I thinking acting reasonably would speak for itself.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Well, perhaps I can ask more directly. You said trustees must act reasonably. I just wonder what that statement of their obligations is grounded in? Are you saying that that's just a general obligation under the act?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Each fund is different and they must act in their best interests. They have a best interests duty and they must act in the best interests of their members. I think that they understand fully what that means.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Minister, there was some media reporting about you and the Treasurer—obviously, both of you were Melbourne based—meeting group insurers. I understand that they've obviously raised concerns about the removal of this legislation, and that's been reported on a number of times from different angles. Would you agree that group insurers—MetLife, AIA, TIA—are likely to lose out once this legislation is passed today?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

We assume that this would to some extent disrupt a business model that has been running for some time; but, as we have said over and over again, these deals between insurance companies and superannuation funds are opaque and quite complex. So you would imagine that there would be some disruption.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Thanks, Minister. If there were some disruption, as you put it, who would likely win out as a result of there being less group insurance? Would you accept the proposition that retail insurers such as the banks and AMP are most likely to benefit from this legislation?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

No, I don't think that's the case. In fact, I think that perhaps it will create a more stringent relationship between the trustees and their insurance firms. Perhaps it might encourage the insurance companies to sharpen their pencils somewhat.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

That may be the case. But do you think it's a fair comment that in this country there's been a proxy war going on between group insurers and retail insurers over this superannuation pool? And do you think it's fair that you've been seen to be going in to bat for retail insurers at the expense of group insurance?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I'm not entirely sure what your question is asking of me or of what relevance it is to this bill.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

I believe it's very relevant and very important. I always like to follow the money. Being an economist, I understand that economics is all about studying human behaviour and incentives. I know—and those who have been following the industry know, and you've worked in it and know it very well—that the banks and AMP have been losing superannuation customers hand over fist in recent years, and a lot of that is thanks to the royal commission. Here's your government in their corner again, coming to their aid with some legislation that's going to open up a new pool of potential revenue for them. If that is the case, I have concerns that you're doing their bidding in this place. I'm just explaining my motivation for asking that question. I would hope that the logic behind this legislation—and, to be clear, the Greens have opposed this all along—is that you actually do believe you are doing a solid for young and vulnerable Australians by reducing the fees that they have to pay on superannuation; that it's not really about just opening up a whole new set of markets for the big banks and insurers in this country.

David Fawcett (SA, Liberal Party) | Link to this | Hansard source

I'll take that as a statement unless, Minister, you wish to respond.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Yes, if I can. Senator Whish-Wilson, I think you have entirely missed the point and premise of this legislation. It is to look after vulnerable and young people to ensure that they have a better chance of saving for their retirement and increasing their retirement savings, getting their retirement savings to a point where they have a critical mass and can benefit from compound interest. It is to get them to that critical mass. This has absolutely nothing to do with an association with any particular firm or any particular tribe in this industry. It is entirely about looking after the most vulnerable cohorts in our society, who, at the moment, are unfairly disadvantaged by the superannuation system and by the insurance sector.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I return again to the questions of information and trustee responsibility. Can I put a scenario to you. Say a fund covers a workplace with 10 office workers and a security guard. The trustee decides that it's a low-risk workplace, based on the information that the employer provides, and then the security guard is involved in a tragedy at work and his dependants have no life insurance cover because of that trustee's decision. Has the trustee acted reasonably in excluding the security guard from cover, and are they exposed, under that scenario, to legal action?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I would imagine that if a security guard had appeared in the top quintile of risky occupations then the superannuation fund would have approached that particular member and told them that they intended to make them opt out of, as opposed to opting in to, their insurance arrangements. So they would be covered by this.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I am concerned about your working assumptions about individual decision-making, financial literacy and engagement with financial questions. This goes a little to some of the questions that Senator Whish-Wilson was asking. Over the last four or five years in this place, the Senate Standing Committees on Economics have considered a range of scenarios where, essentially, consumer behaviour is suboptimal because humans are just naturally not inclined to deal with complex questions around probability and risk, particularly where they run over the long term. In the scenario we're talking about, we're talking about a young security guard, under 26, who's been classified incorrectly as low risk on the basis of information provided by the employer to the trustee. There are two questions arising from this. Has the trustee acted reasonably, and are they exposed to action from dependants? That's a narrow legal consequence and a broader policy consequence. Are you comfortable, really, with these scenarios, where the trustees are so dependent on very active engagement from young people with their superannuation insurance arrangements, when all of the evidence before us, over many years, indicates that that is actually just not the real-world experience of how people, and young people in particular, engage with financial products?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you, Senator McAllister. As you know, we've discussed out of sight of this place that I too have a passion for an improvement in the financial literacy and capability in Australians. I think, if you reverse your cameo on its head, you might say that trustees who have a best interest duty have an obligation to better understand the situation of their members; and, while the real world, as it is, may not look like that, perhaps it should. Perhaps this legislation will encourage those trustees to take a better interest in the members that they have, to make sure that the product they're offering is entirely appropriate, rather than obfuscating that responsibility, which seems to be happening now, and relying on the opacity and complexity of this industry to simply reap the fees for insurance premiums that these people possibly don't want, don't need, might not be able to claim on and don't understand.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

Minister, we probably don't need to go over the reasons why it would be useful to address balance deterioration and erosion. We're on board with that. Labor have given an indication that we're supportive of those objectives. But I go again to the practical mechanisms. There are 1.9 million workers affected by the changes that are being proposed. The trustees have a few months to sort this out. The model that you suggest is that the way they will sort this out is through obtaining individual information from members, and the cohort of members we're talking about are not entirely but largely people under 26 years old. I feel as though you're swimming against the tide on this one. We have all of the data about the level of engagement. Is it not government's responsibility to design a policy intervention that does address the world as it is?

I applaud your interest in increasing financial literacy across the board. I feel like that's going to be quite a long journey, and, in the meantime, we have some very practical proposals before us. Your expectation is that funds are going to sort this out by individually engaging members under 26 in the next few months to obtain information from them about their occupation so they can decide whether or not they're eligible to be in an opt-out fund. I think that is impractical and unworkable and, as I put it to you, it seems particularly so in the case where there is an existing dataset at the ATO that could have been accessed, and you tell me that that wasn't even contemplated. This doesn't seem like policymaking that actually responds to the problem, or the world, and I just question why it is that the government is so stubbornly pressing on with this without dealing with some really practical things that are being raised. We're not talking about a major ideological conflict; we're just trying to talk about a workable solution. I am puzzled, bewildered, surprised, that I can't get more engagement on this informational problem that we're coming up against. I don't think the pathway you propose will provide trustees with the necessary information to make this decision in the time frame suggested by the bill.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Senator McAllister, I understand exactly where you're coming from. But, quite frankly, as I mentioned before, I worked in this industry, and one of the problems that trustees have or the industry complains about is disengagement. One of the things that this chamber complains about is disengagement from the superannuation system. Surely you would think that the superannuation funds would want to reach out to their members, would want to find out more about them, would want to take this opportunity. That's exactly what we've asked them to do. I agree with you; I am puzzled, bewildered and surprised why anybody should be resisting this opportunity to understand more about their members, because that's part of their best interests duty. The winners here are the members. That's who we're here for.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I don't think that it is reasonable to say that trustees, particularly in some of the better performing funds, are not interested or engaging with their members. In fact, the written evidence to the committee around this bill, from a number of trustees, was that they had reached out as part of the Protecting Your Super reforms, they got high levels of responses relative to other kinds of things that they tried to do and they worked very hard to engage on the questions that the government has required them to engage on in the way anticipated by the last tranche of legislation that we dealt with. But there is a limit to how this approach can work, and you know there's a limit. You know that there are only so many email blasts that you can send out that anyone at all will respond to. I do think that government has an obligation to deal with the informational overload that consumers experience in relation to a whole range of things, specifically in relation to financial products.

I come back, again, to the counterfactual. There are other ways that funds could be enabled to receive the data that would allow them to make responsible decisions consistent with their duties as trustees, and your advice to the chamber is that government didn't contemplate these. Your advice is that, instead, you've stubbornly persisted with a mechanism that is clunky and difficult and swims against the tide of human psychological reality. Humans are not going to engage. People are not going to engage with the process as you describe it. It just seems to me clunky and difficult. I'm not sure that we're going to get very much further on it, but I do wish to place on record how impractical this is and my disappointment that government is being so stubborn in just dealing with real-world realities on this front.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Senator McAllister, if a member is contacted and ignores the trustee, that falls back to the member. The trustee should have email, they should have a phone, and members can be contacted in the workplace. There are lots of different ways that members can be contacted. Indeed, if trustees are meeting their best interests duty, they should be contacting their members. I don't think that information overload on young people is a good enough reason to say it's too hard and we'll simply charge members for insurance premiums for a cover that they don't want, don't need, might not know they have and possibly can't claim on.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Has the government done any forecasts or have any projections or any expectation, or, perhaps, even industry feedback to you, as to how many Australians in this cohort are likely to opt in once the laws change?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

That's entirely up to the fund and entirely up to the member.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Of course it is. You mentioned earlier you think this bill is about protecting this cohort of young and low-income Australians. My whole point has been that actually you are taking away protections that are already in place, protections that were put in place deliberately, by Mr John Howard, your previous Liberal Prime Minister, to give vulnerable cohorts a safety net. I don't think any of us can deny that was the motivation behind this. Whether that's costing too much money is another question entirely.

I was interested in your talking with Senator McAllister and your exchange there. You talked about trustees having information about their members and understanding more about their members. I don't think we can assume, by the way, that trustees will always act in the best interests of their members. The royal commission has shown that that hasn't always been the case. I hope it will be, going forward. You also mentioned cross-subsidisation. You mentioned that's the kind of logic in taking away compulsory fees, the default position. Why wouldn't you, as a policy solution, have just put up legislation that makes trustees and group insurers reflect the risks of these cohorts in their pricing? That's what insurance companies do. That's how actuarial studies started—with the birth of the insurance industry in Scotland many hundreds of years ago. It's all about pricing risk. Why are those cohorts paying what they're paying? Why are they being gouged so much by insurance companies? Wouldn't a more neat solution be to have low-income and younger Australians pay lower premiums and have higher-income and older Australians pay a higher premium to reflect where they are in their life and those risks? Why is it that none of that pricing is actually occurring at the moment?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I'm not sure that's entirely germane to this bill. As you would know, that's the premise upon which group insurance is based upon.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

It is the premise upon which group insurance is based, but that's the premise that you're trying to dismantle here, if I can point that out to you. The point of group insurance is to help provide that safety net. That was why your previous Prime Minister put this in place. What I'm suggesting is that we are about to pass legislation on the government policy that, I think, both the Labor Party and the Greens feel is unworkable and is fundamentally removing a safety net for vulnerable Australians, and it could be done in a better way. Once again, I understand the political realities of what we're dealing with here. You want to get this legislation through. You've committed to it; it is your policy. Even though you carved it out under a deal with the Greens, you've brought it back and we have it here before us today. You are going to be making hundreds if not thousands of public servants and others enact a policy that doesn't appear to be workable. You do not appear to have done the research and collected the data necessary to understand the implications of this policy.

I go back to the point that $600 million of payouts have been occurring. You don't even seem to know what occupations those payouts have occurred under. The reason I raise this issue—I will get to a question in a second—is that for the four-fifths of this cohort who will go to opt-in, so they won't be under the status quo of a default, there doesn't seem to be any understanding of whether they're just as much at risk outside the workplace as the high-risk occupations are. As far as I can tell, no work has been done on whether, if I work in a call centre, I'm as likely to die tragically up a ladder on the weekend doing some home renovations as if I'm a tradie or a construction worker who might be considered to be high risk. In fact I would say, conversely—I suppose I am being opinionated here—that a tradie in a high-risk occupation would probably have a better idea about what they were doing if they were renovating their home on a weekend than somebody like me who doesn't know about that stuff.

There just doesn't seem to be any logic behind what you're doing. There's no evidence of a correlation between claims. You don't seem to even have the data on who has and hasn't been claiming. Are the majority of people who've claimed the $600 million a year falling in the cohort of high-risk occupations, or are they not? That to me is the most telling thing. That data is available, and I would have at least expected Treasury to have done an analysis on that. If you could come in here and say, 'Senator, this is the breakdown of claims under group insurance for this cohort, and we can prove to you without a doubt that the most likely occupations to be claiming are these'—but you can't do that. On what basis should we be voting for your legislation today if you can't provide that kind of simple information?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The amendments that the government has put forward are based on WorkSafe information, which actually does provide the information that you're seeking there. That's the best proxy we can possibly find, because essentially the data sits with the insurance company. As I said earlier, those insurance companies are very opaque about the information they have, and there are privacy issues around sharing it as well. What I can tell you, however, is that this legislation will save millions of people billions of dollars towards their retirement savings, because they have insurance at the moment that they don't want, don't need, don't know that they have and possibly can't claim on because there are other avenues to claim for accidents or potentially death. As you would know, just because you have a high-risk occupation doesn't necessarily mean that you need insurance. It's about the need for insurance. In fact, the high-risk occupations essentially are a proxy for need.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Getting back to this issue of cross-subsidisation and the basis of insurance, you're essentially saying that this cohort is unnecessarily and inefficiently subsidising wealthier and older Australians. What work has the Treasury done on the impact of insurance premiums on other insurers outside this cohort? If this is going to take—I forgot the number you mentioned, Minister; perhaps you could refresh my memory when you stand up. You were saying this much money's going to be saved out of the system, but, on the whole basis of cross-subsidisation and risk pooling—the whole reason we have insurance in the first place—that is, therefore, leading to lower payments for other Australians. So what impact is that going to have on the payments for other Australians, and was that factored into the Productivity Commission's estimates?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Yes, you're right. Cross-subsidisation is the foundation of group insurance. However, the reason why we have brought forward this legislation is to look after the most vulnerable in that cohort. They are essentially cross-subsidising people who are more likely to claim unfairly and to an unreasonable extent. The government believes that cross-subsidies arising from inappropriate cover, where they exist, are unfair and shouldn't be allowed to continue. By unwinding these unfair arrangements, the government's reform package may result in a modest premium increase for the majority of cohorts. However, the ultimate effect of these reforms will be heavily dependent on how trustees and insurers respond to these new arrangements. The government's aware that certain funds are increasing premiums. In many cases, there are a number of reasons for that premium increase, including the unwinding of age based cross-subsidies, changes to the underlying cover of the policy and changes to the member base of the fund.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

Minister, I want to take you to the explanatory memorandum, which says:

Financial Impact: The Bill is estimated to have a gain to the budget of $605.4 million over the forward estimates.

Compliance cost impact is listed as 'medium to high'. I'd like you to confirm that figure and also explain the compliance cost impact. Secondly, the supplementary explanatory memorandum, in the government's amendments, says:

The financial impact of the Amendments is estimated to be a cost of $55.1 million over four years to 2022-23.

I'd like you to confirm those figures and give me an explanation of the 'medium to high' compliance cost impact.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I table the supplementary explanatory memorandum relating to the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019. Senator Gallacher, yes, I can confirm those figures. The compliance figure is reflective of the cost of actually contacting the members.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

So you've got forward estimates savings to the government paid for with a high-cost compliance impact on the people the legislation affects. Is that right?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

No, they're two different things.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

Who's paying the additional cost impact?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The compliance cost?

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

The compliance cost listed as 'medium to high'.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

The superannuation funds will likely incur a cost in contacting their members and delivering on their best interests duty.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

They all said the time frame is going to significantly impact on their costs of contacting members, and this is an extraordinarily large exercise. So the guts of it are that the budget savings are $605 million plus an additional $55 million, all paid for by the superannuation funds. Is that correct?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Sorry, Senator Gallacher, I think you've misunderstood the point and purpose of this bill. This is not a budgetary measure. We're trying to save young people and people with low superannuation balances from paying insurance premiums on products that they don't need, don't want, don't know that they have and are unlikely to be able to claim on.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

It's what you said publicly, Minister. This is in your explanatory memorandum:

The Bill is estimated to have a gain to the budget of $605.4 million over the forward estimates.

My understanding is that the removal of the tax deductibility of these premiums will add $605.4 million to the government's bottom line, paid for by a medium- to high-cost compliance activity on the funds. That's what I'm trying to get some agreement on.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you, Senator Gallacher. Obviously, there is going to be some cost to the superannuation funds themselves to reach out to their members. That's what they should be doing anyway as part of their business. We realise that there is going to be a greater compliance component, thanks to this bill, but again I point out to you that you seem to have missed the point. This is about protecting young members and protecting people on lower balances, ensuring that they're not having their retirement savings eroded by unnecessary insurance premiums.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

That's a response, Minister, but I haven't missed the point at all. I am simply directing my query to a specific explanatory memorandum which forecasts savings to the government, essentially with higher cost compliance impacts on superannuation funds. I'll go to the other detail that you want to go to, but that is essentially the situation we're in at the moment. There is a medium to high compliance cost impact on superannuation funds and there is a saving to the forward estimates of $605 million. Are we in agreement on that?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I can confirm that in this $2.9 trillion industry there is a compliance cost over 10 years of $2.85 million.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

What's been put to me is that this legislation will have, as legislation often does, unintended consequences. It's been put to me that the cost of insurance for 25-plus-year-olds will increase, in some cases, by up to 14 per cent. That increase in that group life insurance policy will be deductible; have you done the sums on where that will impact on your projection of $605.4 million? If they get a higher deductibility because premiums have gone up as a result of this legislation then your savings may well be swinging in the breeze.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

It is included in the costing, but I would point out to you that the unintended consequences of not passing this bill and of not legislating are that millions of young people and people who are currently on low balances will not be able to reach that critical mass so that they can take advantage of compound interest. They will have lower savings in retirement; surely that is the objective of this bill?

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

I understand that's the objective that you've promulgated. I'm not sure that it's actually going be the effect, because there are many people in the workforce—casual workers, women, low-income earners—who are never going to get anywhere near a retirement income equivalent to the pension from superannuation, let alone exceeding it. The whole value, in some cases, of this life TPD through the life of their employment is what they're interested in.

You're taking a whole cohort who have $6,000 or less—someone who could be a new migrant to this country, a low-paid cleaner or a young worker. I understand clearly what you're promoting, but you have this awful responsibility as a minister: your own figures will tell you that 3½ per cent of this cohort, between 15 and 24, have dependants. Those are the ATO figures which you use to run your argument. My argument is this: if those people do not opt in and there is tragedy amongst those 3½ per cent, how are you going to live with that? You're saying that if they don't have an email address then that's their bad luck.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I question the premise of your argument, and we also question the accuracy. The ATO have told us that 96 per cent of people in that age cohort don't have dependants. Theoretically, if you want to use that as a proxy for needing insurance, I think that that's a very good proxy. Our aim is to get as many of those vulnerable workers—those on low incomes, those with low balances—above that $6,000 critical mass as quickly as possible by reducing insurance premiums, by taking away insurance premiums for products that people don't know they have, don't understand and probably can't claim on. By taking away those insurance premiums until they reach that $6,000 critical mass we're helping them—in fact, we're encouraging them—to get ahead.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

The figures that are promoted for TPI insurance for young people are in the order of $80 a year, or $1.11 a week. An extra $80 a year is going to be very beneficial, but I can't see how it's going to accelerate the boosting of their balance to over $6,000. What accelerates them to get over $6,000 in their account is getting paid their super on time, getting it paid in full and having a decent job that accrues a reasonable amount of super. Removing a benefit like this from low-income and underemployed people is exposing a cohort, which is something we agree on. You said 96 per cent don't have dependants; I said 3½ per cent do have dependants. Those are the ATO's figures: 3½ per cent of 15- to 24-year-olds have dependants. It's still a decent sized cohort of people.

You're the responsible minister. The awful responsibility you have is the impact of your legislation. If there is tragedy in that family, in that cohort, and they haven't the literacy or the access to the internet or the financial acumen to have gone and tested their meagre superannuation policy and something happens, where will they go for recourse? If there's a suicide or other death, where will they get compensation from?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Forgive me, Senator Gallacher, I thought you said 13½ per cent, not 3½ per cent, so I didn't mean to correct you there. I re-emphasise that we're not denying anybody insurance. Anybody who wants insurance can get insurance. Anybody who thinks they need insurance can get insurance through their superannuation fund. Of that 3½ per cent, the trustees will approach them and say, 'Do you want insurance?' It is opt-in; it's not opt-out. That's all we're trying to do here. In fact, the average premium at the moment is not $80 a year—it's $340. For people on balances that are low or for people under 25, that $340 a year, average, insurance premium is enough to eat away at the fund growth, so it can never get above that critical mass. What we're trying to do is help them get above that critical mass so that compound interest can take effect, and then insurance premiums can be applied appropriately without it eroding their retirement savings.

Alex Gallacher (SA, Australian Labor Party) | Link to this | Hansard source

There might be a figure of $380 across the sector, but we have very specific funds saying it is much less than that, and they have provided evidence to that effect. The reality is that one size doesn't fit all. Your fairly blunt instrument is going to excise a whole cohort of people who, on your own evidence, don't know anything about their super, have no engagement with their super and haven't taken any action to opt out. If your argument was correct they would have opted out. My argument is the reverse. How can you expect people who are not engaged, for whom there is no evidence that they're getting financial advice, to opt in? They don't expect anything unexpected to happen to them. The reality is that industry super funds in particular have looked at a cohort and made a best-interest decision as a result of a group life insurance policy for the whole cohort of members. They believe that's correct. You believe it's incorrect. If your legislation gets through there's a cohort of people who will have nowhere to go, if they're not engaged and they haven't opted in, in the event of something untoward happening. What do you say in respect of that?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I believe we're beginning to cover old ground. This is an incredible opportunity for trustees to engage with those members who are disengaged. That is in fact the problem we're going to be solving as part of this legislation.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

I would just note that, once again, it hasn't happened historically—and this was exposed in painful detail during the royal commission, as you well know, Minister. And while we're all hopeful that we may see changes across the board in the culture of financial service businesses, and I do accept that you, as a person, are genuinely interested in seeing that change in culture, I don't share your optimism that that's necessarily going to happen—unless we actually force it to happen.

But in relation to Senator Gallacher's question about the kinds of people we're talking about here, the real people within this cohort who are going to be disadvantaged by this, I want to ask a question as to why this legislation didn't consider keeping total permanent disability as opt out. To give you a little bit of background, there was some very compelling evidence provided to the economics committee around the impact of cancer on young people. So, Minister, are you aware of what the leading causes of death are amongst young Australians? Are you able to give us the key causes of death or serious mortality for young Australians?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Thank you, Senator Whish-Wilson. I'm not speaking from any statistics here, but my personal understanding is the leading cause of death of young people is in fact suicide—one of those causes of death that often is not, in fact, covered by insurance within superannuation. Again, a very good example of how these young people are often paying premiums for products they don't know they have, don't want, don't understand and potentially can't claim on. What I can tell you though is that Rice Warner, the actuarial firm, has data that shows that less than one per cent of members under 25 claim on their insurance.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Thank you, Minister, but you would accept that that one per cent desperately need that insurance, no more so than in the case of a young person who has cancer.

Sadly, you're right with the information you provided about the leading cause of death, but the second-highest cause of death in this country for young Australians is cancer, which might surprise many people. Every year more than 1,000 individuals in Australia aged between 15 and 25 are diagnosed with cancer. It is the second leading cause of death in this age group. This information was provided to senators during the committee inquiry. And while the overall survival rate is high—89 per cent, thankfully—there is a long process of being drawn away from financial independence and a career path because you have to deal with an extremely traumatic event like getting cancer at that age. They're covered under this scheme. They're covered because this is the default, and it was designed to be provided so that these vulnerable cohorts had a social safety net.

Interestingly, when you read the inquiry submission from the Cancer Council, they say that the total permanent disability insurance associated with superannuation may be the only financial support open to these young people at such a stressful time in their life. But, Minister, they do acknowledge and recognise that a default death benefit may not be required by most of these individuals given the low likelihood that they might have dependents. Was there any consideration given to maintaining the default position on TPD versus payments for life insurance?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I think this is outside the remit of this legislation, so I can only really take it as a comment. Suffice to say, I do believe that this legislation, once enacted, will create an environment where perhaps the superannuation funds and the insurance companies are a little bit more considered about the products they put together for their members.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

Minister, do you have any comprehension of the kind of out-of-pocket costs, not to mention the emotional costs, of a young Australian in that 15- to 25-year-old cohort having to fighting cancer?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

Again, I don't necessarily think that's relevant to this particular piece of legislation, but I will comment that obviously Australia has a quality medical system. We have Medicare; we have the disability support pension; there is the NDIS. The disability support pension helps those that are out of work due to disability.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

It is totally relevant to this. It is totally 100 per cent relevant to this bill and why the Greens have opposed it all along. We support a safety net; we support a risk-pooling system. It was set up by the government to protect the most vulnerable Australians. That is exactly what you are taking away today. Yes, my example may be emotive, but it is very real of those vulnerable Australians, the ones who are most at risk from the changes we are going to see today. The Cancer Council also pointed out that active low-balance accounts most likely belong to low-income earners, something I think we all accept. I noted in Senator McAllister's speech in the second reading debate that it's women in particular who have experienced family related career breaks or part-time employment. Of course, many in part-time employment actually aren't covered by other workplace forms of insurance you would be covered with if you had full-time employment. Is the minister aware that this low-income cohort is 39 per cent more likely to suffer from cancer than those outside of that low-income cohort, given the stresses in their life and the challenges that they face?

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) | Link to this | Hansard source

I think we're getting repetitive, and I've already said I'll take those issues about cancer as a comment. I will, again, re-emphasise that Rice Warner, the actuary that is an expert in this field, has shown that some members under 25 are paying over 300 per cent of their true premium for death and TPD cover, and this particularly affects women.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

One last question; I will go back to my earlier question which you didn't answer, Minister, because you said it was outside the scope of this bill. If that is the case, if the data that Rice Warner has provided is correct, why hasn't the government worked with the insurance industry to tailor and provide a product, whether it's TPD or life insurance, that does factor in age and income? If the data is there and the actuaries do have this information—don't get between these companies and a bowl of money. They know the kinds of risks they're pricing and what kinds of returns they're going to make. And I absolutely agree that they have been gouging customers, including this most vulnerable cohort. Rather than removing the safety net of default insurance, would a simpler solution be to have the insurance priced properly? If everything you've said in here is correct and you have confidence that the trustees have a relationship with the dependants under those systems and they have that information, then why don't we actually put in place a system where they can price these products properly? That would take away the whole issue of cross-subsidisation and allow us to maintain a system that protects our most vulnerable Australians.

Carol Brown (Tasmania, Australian Labor Party, Shadow Assistant Minister for Infrastructure and Regional Tourism) | Link to this | Hansard source

The question is that the amendments moved by Senator Roberts to government amendments (5), (9), (14) and (16) be agreed to.

Question agreed to.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

by leave—I move opposition amendments (1), (2), (4) to (6), (8) to (11) and (13) on sheet 8767 together:

(1) Amendment (1), omit "November 2019", insert "January 2020".

(2) Amendment (4), item 3A, paragraph 68AAF(1)(c), before "the member", insert "it is reasonable to conclude".

(4) Amendment (6), omit "November 2019", substitute "January 2020".

(5) Amendment (7), omit "November 2019", substitute "January 2020".

(6) Amendment (8), omit "December 2019", substitute "February 2020".

(8) Amendment (10), omit "November 2019", substitute "January 2020".

(9) Amendment (11), omit "November 2019", substitute "January 2020".

(10) Amendment (12), omit "November 2019", substitute "January 2020".

(11) Amendment (13), omit "November 2019", substitute "January 2020".

(13) Amendment (15), omit "November 2019", substitute "January 2020".

I should indicate, just from a procedural perspective, that I move only these items to avoid duplicating the matters that have been dealt with in the One Nation amendments that we just considered.

These amendments from Labor go to the issue that I've been exploring this morning with the minister. The government's proposed approach to deal with high-risk workers assumes that trustees will have complete information about the occupational risk associated with each of the individual fund members' occupations. This is not the case. It is not the case now and it is unlikely to be the case in the future. It is very unlikely that funds will be able to obtain this information with this level of certainty as defined in the scheme laid out by the minister. The funds at the moment only have information that the employer gives them. That information is, in any case, often incomplete, but the legal obligation is merely to provide the worker's name, the date of birth and the address. Most funds are able to supplement that, and Senator Hume has made reference to the process by which the funds engage with their members to do that, but this is a time-consuming and imperfect activity, and the mechanism imagined by the government to protect high-risk workers as a consequence is quite inadequate.

The frustration that I have and that Labor has about this is that there are alternatives available. And so what the industry funds have said to us is that they are already engaging with the ATO. There is a relevant data set at the ATO which could be used to provide more complete information about members and their occupations and thus allow funds and trustees to establish the risk profile of each of their members. But, as Senator Hume told the chamber earlier, this was not contemplated by government, for reasons that haven't really been explained, and so we are left with a quite imperfect model.

We're not the government. We can only respond to the agenda set in the chamber here by the government. To that extent, we are now in the second-best position of trying to improve upon a government proposal which we are not entirely satisfied with but which we are prepared to work on together. And the amendments that I am moving now just seek to make one key difference. We seek to change the government mechanism so that, if a trustee makes a decision, they may make that decision under a reasonable belief about the risk profile of their members.

Our concern is this: without this protection that the trustee must only establish a reasonable belief, our concern is that trustees are at risk of legal action—being sued by either a member or a dependant of a member—because the trustee made the wrong decision as to whether or not to provide cover. As I've indicated, there are other means by which we could address this problem. If the government were willing to do so, the provision of ATO data would also be an alternative pathway by which we could solve this unsatisfactory situation where the truth is that trustees do not have enough data about their members. There are other means, but the government has indicated that it's unwilling to consider this; in fact, it's been unable to explain why it hasn't considered it so far. And so our proposal before the chamber now is that we insert a provision that the trustee must have a reasonable belief that an individual member is in a high-risk occupation and therefore can be switched into a category where they continue to be provided group insurance on an opt-out basis.

This is a compromise, but it is an attempt to reach agreement with government to allow their mechanism, which they are proposing, to work as it is intended to work. Based on the feedback that we are receiving from funds and trustees, we present this argument, and we hope that it will enjoy support from others in the chamber.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

We'll be supporting these amendments because it's better than the position before us that will see default insurance completely removed, but I would point out to Senator McAllister that, while I think we both agree on that, actually the issue here is outside of work. With high-risk occupations, the issue is that the default insurance situation we have in this country was set up to provide a safety net for vulnerable Australians in this cohort that we're dealing with today, and it actually is most important outside of work. I feel that the whole question of high-risk occupation versus low-risk occupation is not going to get to the heart of the problem here. Nevertheless, we'll be supporting the amendments because they're an improvement on the government's bill.

The CHAIR: The question is that amendments (1), (2), (4) to (6), (8) to (11) and (13) on sheet 8767, as moved by Senator McAllister, be agreed to.

Sue Lines (WA, Deputy-President) | Link to this | Hansard source

The question is that the government amendments, as amended, be agreed to.

Question agreed to.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

by leave—I move the Greens amendments (1) to (19) on sheet 8655:

(1) Schedule 1, item 1, page 3 (line 8), at the end of the heading to section 68AAB, add "in relation to choice products".

(2) Schedule 1, item 1, page 3 (line 11), omit "or MySuper product".

(3) Schedule 1, item 1, page 3 (lines 26 and 27), omit "or MySuper product".

(4) Schedule 1, item 1, page 4 (line 30), omit "or MySuper product".

(5) Schedule 1, item 1, page 4 (line 33), at the end of the heading to section 68AAC, add "in relation to choice products".

(6) Schedule 1, item 1, page 5 (line 1), omit "or MySuper product".

(7) Schedule 1, item 1, page 5 (lines 11 and 12), omit "or MySuper product".

(8) Schedule 1, item 1, page 5 (after line 29), after section 69AAC, insert:

68AACA Benefits providing by taking out insurance—MySuper members with low -balance account or who are under 25 years old

(1) Each trustee of a regulated superannuation fund must ensure that a benefit is not provided by the fund to, or in respect of, a member of the fund under a MySuper product held by the member by taking out or maintaining insurance if:

(a) both of the following apply:

(i) the member has an account balance with the fund that relates to the product that is less than $6,000;

(ii) on or after 1 November 2019, the member has not had an account balance with the fund that relates to the product that was equal to or greater than $6,000; or

(b) the member is under the age of 25 years.

(2) This section does not apply to:

(a) a defined benefit member; or

(b) an ADF Super member (within the meaning of the Australian Defence Force Superannuation Act 2015); or

(c) a person who would be an ADF Super member apart from the fact that the regulated superannuation fund is or was, for the purposes of Part 3A of the Superannuation Guarantee (Administration) Act 1992, a chosen fund for contributions for the person's superannuation by the Commonwealth; or

(d) a member to whom the employer-sponsor contribution exception applies (see section 68AAE).

(3) Nothing in this section affects a right of a member of a regulated superannuation fund if:

(a) the right relates to insurance cover; and

(b) in compliance with this section, an insurance premium in relation to the member for that insurance cover ceases to be paid; and

(c) the right exists because of insurance premiums paid in relation to the member before insurance premiums cease to be paid as mentioned in paragraph (b).

(4) Nothing in this section affects a right of a member of a regulated superannuation fund if:

(a) the right is a right to insurance cover for a fixed term, subject only to the payment of insurance premiums; and

(b) that fixed term begins before the time at which a trustee of the fund is required under subsection (1) to ensure that a benefit is not provided to, or in respect of, the member under a MySuper product held by the member by taking out or maintaining insurance.

(9) Schedule 1, item 2, page 5 (line 32), omit "and 68AAC", substitute "68AAC and 68AACA".

(10) Schedule 1, item 3, page 5 (line 35), omit "and 68AAC", substitute "68AAC and 68AACA".

(11) Schedule 1, item 5, page 6 (line 6), omit "or 68AAC", substitute ", 68AAC or 68AACA".

(12) Schedule 1, page 6 (after line 6), after item 5, insert:

5A After section 68AA

Insert:

68AB Commonwealth to provide permanent incapacity benefit and death benefit to certain MySuper members

(1) This section applies to a member (the applicable member) of a regulated superannuation fund under a MySuper product held by the member if:

  (a) section 68AACA applies in relation to the product; and

     (b) the member does not hold a choice product or another MySuper product with any regulated superannuation fund (including the first-mentioned fund) that provides permanent incapacity benefit and death benefit to the member.

(2) APRA, on behalf of the Commonwealth, must provide permanent incapacity benefit and death benefit to the applicable member in accordance with:

(a) if the member holds a MySuper product with only one regulated superannuation fund—the policy of insurance that fund has taken out for the purposes of section 68AA; or

(b) otherwise—the policy of insurance determined by APRA under subsection (3).

(3) If the applicable member holds a MySuper product with more than one regulated superannuation fund, APRA must determine, from the policies of insurance those funds have taken out for the purposes of section 68AA, the policy the provision of permanent incapacity benefit and death benefit must be in accordance with.

(4) In making a determination for the purposes of subsection (3), APRA must take into account any matters specified in the regulations made for the purposes of this subsection.

(5) The regulations may prescribe circumstances in which APRA is not to provide permanent incapacity benefit and death benefit under this section.

(13) Schedule 1, item 6, page 6 (lines 9 to 16), omit the item, substitute:

6 At the end of paragraph 20QA(1 ) ( a)

Add:

(ix) no benefit that despite section 68AAB of the SIS Act could, because of the application of subsection 68AAB(5) or (6) of that Act, be provided to, or in respect of, the member under the product by taking out or maintaining insurance is provided in that way; and

(x) no benefit that despite section 68AACA of the SIS Act could, because of the application of subsection 68AACA(3) or (4) of that Act, be provided to, or in respect of, the member under the product by taking out or maintaining insurance is provided in that way; and

(14) Schedule 1, item 7, page 6 (lines 17 to 19), omit the item, substitute:

7 Subsection 20QA(3)

Omit "subparagraphs (1) (a) (iv), (v) and (viii)", substitute "subparagraphs (1) (a) (iv), (v), (viii), (ix) and (x)".

(15) Schedule 1, item 8, page 7 (line 9), omit "or MySuper product".

(16) Schedule 1, item 8, page 8 (line 6), omit "or MySuper product".

(17) Schedule 1, item 8, page 8 (line 22), omit "or MySuper product".

(18) Schedule 1, item 9, page 9 (line 11), omit "or MySuper product".

(19) Schedule 1, page 9 (after line 13), after item 9, insert:

9A Application of sections 68AACA and 68AB

(1) Section 68AACA of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), as inserted by item 1 of this Schedule, applies in relation to a benefit provided by a regulated superannuation fund to, or in respect of, a member of the fund under a MySuper product held by the member, if the member becomes such a member on or after 1 February 2020.

(2) Section 68AB of the SIS Act, as inserted by item 5A of this Schedule, applies in relation to a member of a regulated superannuation fund under a MySuper product held by the member to which that section applies if the Consolidated Revenue Fund is appropriated for the purposes of providing permanent incapacity benefit and death benefit to such a member under that section.

I think the Greens have been very clear in this debate yesterday, today and when the legislation was before us in the last parliament. We want to see default insurance maintained for vulnerable cohorts, low-income and younger Australians. We want to see that maintained as opt-out. We don't believe opt-in will work. We believe it will put a cohort of young Australians and low-income Australians at considerable risk. This was set up to be a social safety net, and we believe that the government has an important role to play in ensuring that especially vulnerable Australians are protected.

The Greens have what we believe is a comprehensive fix that is reflected in the amendments before us today. The amendments that have been circulated would quite simply prohibit members who are under 25 and with low-account balances from being provided group insurance through default superannuation funds. Instead, they would provide a pathway or legislation that establishes the government as the shadow provider of insurance for these members by assessing and honouring valid claims under the same terms and conditions as would be the case if these members were defaulted into group insurance. In other words, though I know this may be quite shocking to some senators in the chamber, we would like to nationalise life insurance and TPD as it's set up currently for the excluded cohorts in this bill. This would fix the problem of young people having their balances eroded, which the minister has pointed out today. That was provided for in the Productivity Commission reports, and the minister has also quoted Rice Warner. This would solve that problem. It would ensure that those who most need TPD and life insurance and protection get it. This would ensure that the situation at the moment is maintained: that it's opt out; it's default. If you're unlucky enough to be under 25 or in the low-income category, for example, and you have a fight with cancer, then you're covered. It's just one example that we've given today.

I did talk in some detail about it in my speech on the second reading yesterday, so I won't labour it for too much longer. This could be provided by the government entirely to maintain the social safety net, or it could be provided on a costs basis. There are a number of different models that could be applied to that. I would ask the senators to consider this. It could still be provided under the current payment of premiums, but that would be my least preferred model, because I think it's been established that a number of this vulnerable cohort are being gouged by group insurers. I believe it could be paid for at cost, especially if, as the Greens suggested in the earlier debate this morning, we use the actuarial data and age and income weighted TPD and life insurance in this country, which you would expect would be a reasonable proposition.

If the government provided this at cost—should I also say the shocking words 'not for profit'—if this were provided by the government on a not-for-profit basis or at-cost basis, then of course the premiums for this vulnerable cohort would be a lot lower. I don't have that data. Much as I have amazing staff in my office—I think some of the smartest staff in this building, I would like to boast—we don't have the capabilities to model how much lower that premium might possibly be. But, nevertheless, logic would show that a government administered system—Singapore is an example—would provide much lower-cost TPD and life insurance for vulnerable cohorts. And, as I pointed out to Senator Bragg in here yesterday, you could even have a model where the government might set the parameters and regulate, but it could still be essentially run and outsourced to group insurers and others at cost. You could still get industry involvement, but it still would be a government system. There are a lot of different alternatives to this. We believe it's a neat solution to the problem that we're facing here today. I would recommend the Greens amendments to the Senate.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

I just want to indicate the opposition's voting position on this. I note that Senator Whish-Wilson seeks to ensure that young people around Australia are appropriately covered by life insurance, and that is an objective which Labor shares. But we won't be supporting these particular amendments; they propose a quite bold change to the architecture of insurance and safety nets in Australia, including a very significant role for government. Inevitably, it would have financial implications for government.

I think one could see in Senator Whish-Wilson's contribution that there are a number of uncertainties about the practical implementation arrangements for the scheme proposed in the amendments and, whilst creative, it's not a scheme that we would support, and so we won't be supporting the amendments.

Peter Whish-Wilson (Tasmania, Australian Greens) | Link to this | Hansard source

I might add, just to get on the record, the way we estimated the costs using the PBO data which I mentioned in the Greens' earlier contribution. If we assume the historical data is accurate, we're looking at $600 million a year that is paid out to this vulnerable cohort on average. May I remind the chamber that it suggests a number of vulnerable Australians—young Australians and low-income Australians—are currently using the default insurance that they get through their super. We believe the costs would be $600 million a year maximum.

We could have a debate at some other time as to whether that's a reasonable investment by government in vulnerable Australians. I believe it probably would be. Nevertheless, it could also be reduced significantly by the payment of premiums by this cohort. But of course they're never going to get lower premiums through potential price gouging by group insurers. It could be done at cost and it could even be administered by the industry.

I'll finish just by saying that perhaps at some other time, Senator McAllister, we could look at this sort of thing in more detail because I think there is a broader discussion to be had in this country about government nationalising super across the board, let alone for this cohort. I think there is a very important role for government to play in this.

The CHAIR: The question is that the amendments as moved by Senator Whish-Wilson, (1) to (19) on sheet 8655 together, be agreed to.

Question negatived.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) | Link to this | Hansard source

by leave—I move Labor amendments (1) to (13) on sheet 8764 together:

(1) Schedule 1, item 1, page 3 (line 15), omit "1 July 2019", substitute "1 April 2020".

(2) Schedule 1, item 8, page 7 (lines 5 and 6), omit "1 October 2019", substitute "1 July 2020".

(3) Schedule 1, item 8, page 7 (line 7), omit "1July 2019", substitute "1April 2020".

(4) Schedule 1, item 8, page 7 (line 11), omit "1 July 2019", substitute "1 April 2020".

(5) Schedule 1, item 8, page 7 (line 14), omit "1 August 2019", substitute "1 May 2020".

(6) Schedule 1, item 8, page 7 (line 18), omit "1 October 2019", substitute "1 July 2020".

(7) Schedule 1, item 8, page 7 (line 23), omit "1 July 2019", substitute "1 April 2020".

(8) Schedule 1, item 8, page 8 (line 9), omit "1 July 2019", substitute "1 April 2020".

(9) Schedule 1, item 8, page 8 (line 20), omit "1July 2019", substitute "1April 2020".

(10) Schedule 1, item 8, page 8 (line 24), omit "1 July 2019", substitute "1 April 2020".

(11) Schedule 1, item 8, page 8 (line 27), omit "1 October 2019", substitute "1 July 2020".

(12) Schedule 1, item 8, page 8 (line 30), omit "1 July 2019", substitute "1 April 2020".

(13) Schedule 1, item 9, page 9 (line 13), omit "1 October 2019", substitute "1 July 2020".

These amendments go to the critical issue of time frame for implementation. In particular, they seek to further extend the implementation time frame.

The government has, just now, moved amendments to its own bill, which have shifted implementation deadlines to April. Labor's view is that those ought to be extended to July. That's based on the advice that was received by the committee when it examined this matter. In particular, the Australian Prudential Regulation Authority gave evidence:

APRA considers an appropriate implementation timeframe would be, at minimum, 6 months but preferably 12 months …

Whilst Labor's amendments do not go as far as 12 months, we think that the July implementation arrangements would be preferable. That's based on feedback from industry, which sees there is a natural opportunity at the beginning of a financial year to commence the new arrangements; it's on that basis that we're moving these amendments.

It's important to understand how complex it is to implement a reform of this kind and the fact that it does take time to do it properly and to do it well. Industry Super Australia, which is the body that represents all of the industry super funds, provided evidence as follows:

If the Government proceeds with the proposed changes, the implementation date is unimplementable and will result in member confusion and detriment. It is proposed that the commencement date of 1 July 2020 would allow funds to renegotiate insurance contracts on reasonable terms, make relevant system changes and properly inform members, but under no circumstances should it be sooner than 6 months after royal assent.

I want to go to that question about renegotiating insurance contracts on reasonable terms. I spoke about this in my second reading contribution. These are complex commercial matters. A negotiation will take time and that is compounded by the fact that the insurance companies will be negotiating with every firm in the industry during this very short window of time. It is not in members' interests that those negotiations be rushed. Trustees ought to have the time that is necessary to engage in robust commercial negotiations with insurance providers so that they can obtain the best deal for their members.

A rushed process doesn't place pressure on the insurance funds, as Senator Bragg erroneously attributed to me yesterday in this place. I'm not concerned about the pressure it might place on the insurance funds; I am concerned about the pressure it places on trustees and the constraints it places on them to pursue the outcomes that they know are in the best interests of their members, consistent with their duties as trustees. It's on that basis that we are making this recommendation for just a little bit more time.

Again, I reiterate my earlier proposition. Labor is trying to make these reforms work. We are broadly on board with the objective of the bill, which is to limit the erosion of member balances. But you have to do this in a practical and workable way and in a way that responds to the real-world conditions of the industry. The advice we are receiving is that time is required to contact members, to engage in that communication process and also to undertake commercial negotiations in relation to group insurance.

AustralianSuper provided very useful evidence to the committee about the impact of the previous round of reforms on their ability to communicate with their members and administer the changes—another round of reforms that were done in an enormously compressed time frame. They said:

'… due to the short timeframe for removing cover for inactive members, the response from affected members was overwhelming and our expanded contact centre was unable to cope with the volume of calls.' That's not in members' interests.

They went on to say:

Whilst losing cover may provide significant benefits from not eroding account balances for the majority of members, a failure to make an informed decision to continue cover for members with financial commitments and dependents may have dire financial consequences for those unfortunate enough to die or become disabled.

Similarly, Mine Super gave evidence about the difficulties communicating with workers in regional and remote locations, FIFO workers. It is difficult to reach these people, and a compressed time frame creates the real risk that there won't be adequate communication between funds and their members. It is on that basis that we do urge the government to be flexible in relation to implementation. We've got recommendations from industry that implementation occur at the beginning of the financial year, next year. This seems reasonable and sensible, and it's on that basis that I commend these amendments to the chamber.

The CHAIR: The question is that amendments (1) to (13) on sheet 8764 moved by Senator McAllister be agreed to.