Australian insurance a rip-off for Kiwis
If you’ve ever worked across the ditch: now is a good time to check in on your Australian superannuation account. But make sure you’re sitting down first, and maybe pour yourself a stiff drink. As Kiwis transfer their retirement funds back home, they’re often met by a heart-sinking realisation: thousands of dollars have gone missing. In some cases, their accounts have been emptied altogether.
The Australian Royal Commission has uncovered deep rot throughout the financial services sector. It looks like quite a few New Zealanders are affected, and may not be aware of it yet.
The relevant scandal here is the so-called ‘zombie’ insurance policies.
There are several layers to this particular piece of chicanery. First, Australian superannuation schemes sign their members up for group insurance by default. That means most people have been unwittingly sold life insurance and total and permanent disability insurance, and some are also paying for income protection.
Insurance is important, but it has to be a deliberate decision. Life insurance in particular is a very strange choice for young people with no dependants.
The combined premiums can be as high as A$2000 (NZ$2067) a year, which comes straight out of retirement savings. While members can opt out, most people don’t – in fact, a sizeable minority have no idea they’re paying for insurance at all.
The second layer of the scandal involves duplicate ‘zombie’ accounts. Superannuation in Oz doesn’t follow you for life. You might end up with several different accounts as you change jobs, each of which signs you up for group insurance.
It’s estimated that the industry has been extracting a whopping A$1.9 billion a year in duplicate premiums. If you think no-one noticed this was happening, I have a bridge to sell you.
It gets worse again. Let’s say you’ve been paying for an insurance policy you didn’t want, and possibly for more than one. At least you get the benefit of that cover, right?
Not necessarily. Some policies aren’t valid once you leave Australia, or hinge on being a ‘permanent resident’. Of course, most people only ever find that out the hard way.
I know of someone who diligently bought insurance for nine years. She told her provider she was moving to New Zealand, and made sure to update the address on file. And they took her money, month after month, year after year, in exchange for a completely useless policy.
This is the time to have that drink, or scream into your pillow. Once you’ve got it out of your system, here’s the action plan:
1. Check in on your superannuation. If you’ve forgotten who your provider is, the Australian Tax Office can link you up with your various accounts.
2. Find out if you’re being charged for duplicate insurance premiums, and whether the cover you’re buying actually covers you in New Zealand.
3. Decide whether you want the insurance you’re signed up for. The group policies can be good value, and some returning Kiwis are quite happy to keep them in place.
4. Think about whether it makes sense to leave your super in Australia, or bring it home. There are pros and cons to both.
This is only one small glimpse of the rot at the heart of the Australian banking industry. Changes will be made, heads will roll, and criminal charges will no doubt be filed.
But it’s going to take a while to pick the scandal apart. In the meantime, it’s up to you to fend off the zombies.
It looks like quite a few New Zealanders are affected, and may not be aware of it yet.