Insurance in super benefits recipients and the budget bottom line

A new report released today by the Association of Superannuation Funds of Australia (ASFA) reveals the benefits of insurance in superannuation.

The report author, ASFA Director of Research Ross Clare, said most death, disability and income protection insurance held by Australians was provided through superannuation and without it, many people would have no insurance protection at all.

Mr Clare said receiving an insurance payout was not a rare event.

ASFA analysis of claims data indicates that over a working life of around 40 years:

• A fund member with an income protection policy on average has a 25 per cent chance of having a benefit being paid to them in the context of a temporary disability or medical condition
• Around five per cent of fund members over a working life will claim a Total and Permanent Disability (TPD) benefit
• Around five per cent of fund members will have an insurance policy death benefit paid to the fund member’s beneficiary or beneficiaries or to the individual in the form of a terminal condition payment.

In the 2015–16 financial year, around 16,900 TPD benefit payments worth more than $1.7 billion were made from superannuation funds to members.

There were more than 18,500 life insurance claims and nearly 37,000 income protection claims paid. Total benefits paid amounted to about $5 billion.

Mr Clare also said insurance through super provides better and less expensive cover than policies held outside super.

“Premiums for a given level of cover are lower across age categories between 30 to 60 years, for both genders,” he said.

For women, the difference in premiums ranges from approximately 25 per cent to 55 per cent – increasing with age. Similarly for males, the difference ranges from approximately 35 per cent to more than 60 per cent – also increasing with age.

“The burden of under-insurance on society and government resources would be significantly greater without insurance in super,” Mr Clare said.

“It reduces the level of social security benefits payable due to a lack of coverage. Currently, under-insurance in relation to death, TPD and income protection costs the government more than $1 billion annually in additional social security payments.”

Mr Clare said case studies and testimonials provided by super funds showed the critical difference insurance in super policies were making in the lives of members and their families.

“In addition, many funds have reviewed and revised their insurance arrangements to better align with the needs and circumstances of their members,” he said.

Funds are also working to make it even easier for members to opt out from or otherwise change their insurance cover using a variety of easily accessed methods.

The super industry continues to work collectively to improve insurance offerings through the Insurance in Superannuation Working Group (ISWG).

For further information, please contact:

Teresa Mullan, Media Manager, 0451 949 300.

About ASFA

ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system so people can live in retirement with increasing prosperity. We focus on the issues that affect the entire superannuation system and represent more than 90 per cent of the 14.8 million Australians with superannuation.