Why Your Insurance Premiums Could Skyrocket!
As you may be aware, from 1 July 2019, new ‘Protecting Your Super’ laws came into effect. They were brought in to ensure that super account balances are not being unnecessarily eroded by fees and insurance premiums, particularly for accounts that have a low balance or have been inactive for a certain period. One of these measures relates to automatic cancellation of insurance cover for inactive super accounts and this is triggered if there have been no contributions for 16 consecutive months unless the member ‘opts in’ to keep the insurance. Forefront in the government’s mind in making these changes were younger people who had yet to consolidate several superfunds opened during their fledgling careers and who also potentially were less likely to require insurance cover at that time.
These changes will have enormous flow on effects for the premiums of those with insurances remaining within the superfund environment. Insurance, fundamentally, is a risk pool – a large group of individuals that allows the higher costs of the less healthy to be subsidised by the relatively lesser costs of the healthy. This fundamental principle will be impacted greatly by these sweeping super laws. As mentioned earlier, a significant proportion of the automatic cancellations will be those younger people who hadn’t consolidated multiple funds. These premiums represent a significant chunk of the healthy ‘subsidisers’ and that means that superfunds will be forced to increase premiums to ensure that their total book remains viable.
We are already seeing corporate, retail and industry superfunds make substantial increases to premiums – see the example below from an industry fund,
|Cover Type||Payout Amount||Premium p.a. now||Premium p.a. after 1st August 2019||% increase|
|Total & Permanent Disability||$2,068,438||$1,572.01||$3,366.18||114%|
The great concern is that for many people, insurance inside super remains out of sight and mind. These increases to insurance premiums must be duly considered and can no longer be ignored. MBS Insurance are our in-house insurance broking division and have access to every insurer in the market. We encourage all clients to conduct a review of their existing cover to ensure that it is both competitive and appropriate to their circumstances.
Simply send your PrimeAdvisory Accountant or Financial Advisor a copy of your latest super statement for MBS Insurance to provide a one-page review for your peace of mind.