Industry superannuation funds are cutting the costs of compulsory insurance for fund members after the area has been the subject of criticism from some commentators over excessive costs.
Building industry fund Cbus has cut the cost of death and total and permanent disability insurance for most of its members by 25 per cent while increasing cover levels.
But death cover for those aged 15 to 20 has actually been cut to reduce the burden of cover levels generally not needed by younger people. The move “recognises the fact that young people are less likely to have dependants or mortgages and that more super savings earlier is critical over the long term for retirement balances”, said Cbus CEO David Atkin.
The result will be a cut of more than 50 per cent for insurance costs for 15 to 20 year olds in Cbus from $7.16 a week to $2.68 a week. The change will see death cover for the age group also halved, from $104,000 to $52,000.
Tourism and hospitality industry fund Hostplus has cut the cost of death and TPD insurance by six per cent while maintaining cover levels.
Hostplus CEO David Elia said the latest cut was the second in under two years.
“We’re committed to providing great value and maximum return on our members’ investments,” he said.
“Not only are we guaranteeing the same level of cover and conditions, we’re also lowering premiums by six per cent through to 2020.”
First Super CEO Bill Watson told The New Daily that the fund had cut insurance premium costs by 5.5 per cent in a reset in October 2016.
“We looked at death and TPD and made a number of changes without downgrading cover levels,” he said.
A spokeswoman for REST Super said the fund was reviewing its insurance costs at the moment.
The moves follow the formation of a working group by the superannuation sector last year to look at improving the insurance offer for super fund members.
Financial services minister Kelly O’Dwyer last week called on the group to produce tangible results such as a binding code of practice that covers insurance purchased in superannuation.
“Insurance, like other elements of superannuation, need to be constantly assessed to ensure they are working in members’ best interests and where changes are required, funds should be responsive,” Mr Atkin said.
Key changes in Cbus’ offer include:
- New premium costs to apply from September 30 2017
- Premium rate reduction of 25 per cent or $3.58 to $2.68 per week cost per unit for death and TPD cover
- A 40 per cent reduction on TPD for manual worker members and 44 per cent reduction for non-manual and professional members
- Premiums for income protection accident only cover for sole traders down by 44 per cent
- Cover per unit of TPD increasing between 20 per cent and 100 per cent for manual workers aged between 15 and 44, while for those between 15 and 20, cover will double from the current $26,000 to $52,000.
Research by Rice Warner has found that insurance in super is a significant part of overall life insurance cover. Some 71 per cent of death cover is in super funds as well as 88 per cent for TPD cover and 59 per cent for income protection cover, The New Daily has reported.