Superannuation life insurance fees surge
Fund members have received, or are about to receive, notifications from their funds of increases in the cost of insurance premiums of up to 50 per cent.
From June 29, the 2 million members of the AustralianSuper fund will face increased premiums for death and for total and permanent disability cover by almost 40 per cent and by about 25 per cent for income protection insurance.
Super funds of all types - not-for-profits, "retail" funds run by banks or corporate funds - are increasing their insurance premiums.
The insurance is in most cases a default option, unless you actively choose to opt out. The money is deducted automatically from the member's account balance by the fund. The funds note the insurance on their regular statements but in many cases people are unlikely to be aware that they have the insurance.
Super funds have contracts with insurers that typically run for three years; and some of the biggest funds are coming up for renewal at the same time.
More funds are expected to announce rises as they renegotiate prices with their insurers.
Insurers are putting up their premiums because fund members are making more claims as the economy remains weak and unemployment edges up, said Jim Minto of insurer TAL Australia, which is AustralianSuper's biggest insurer.
Mr Minto said there were significant premium price falls towards the end of the global financial crisis as insurers expected claims would fall as the economy improved. He said there was a strong relationship between insurance claims and higher unemployment.
Though prices are rising, the funds are providing more cover for each dollar of premium. Most funds provide a certain level of "default" cover, where the member receives the cover without choosing to have it. The amount of default cover is usually based on the member's age, and members can usually elect to increase or decrease the cover. Taking out insurance through super is much cheaper than obtaining the same cover outside of super.
Warren Chant, co-founder of researcher Chant West, said while the price rises were high, it was still good value. He said a 40-year-old with AustralianSuper paid about $2 a week for $150,000 worth of death and disability cover. And after the 40 per cent price rise, the 40-year-old would still be paying only about $2.80 a week.
More personal finance in today's Money liftout.
Frequently Asked Questions about this Article…
Insurers are raising premiums because fund members are making more claims as the economy remains weak and unemployment edges up, according to TAL Australia’s Jim Minto. Many super funds are also renegotiating three‑year contracts with insurers at the same time, which is driving price increases.
From June 29, AustralianSuper’s roughly 2 million members will see death and total & permanent disability (TPD) cover rise by almost 40%, and income protection insurance increase by about 25%.
Yes. Not‑for‑profit funds, 'retail' super funds run by banks and corporate funds are all increasing insurance premiums as they renegotiate prices with insurers.
Insurance provided through super is usually a default option unless you opt out. Premiums are automatically deducted from your super account and appear on regular statements, though many members may not realise they have the cover.
Yes. Funds say they are providing more cover for each dollar of premium. Most funds offer a default level of cover (usually based on age) and members can typically choose to increase or decrease that cover.
Yes. Default cover is provided automatically, but members can usually elect to opt out or to increase or reduce their cover. Check your fund’s communications or statement to see your current settings and options.
According to the article, taking insurance through super is much cheaper than obtaining equivalent cover outside of super, even with the recent premium rises.
More funds are expected to announce rises as they renegotiate prices with insurers and as a number of large funds come up for contract renewal at the same time.
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