Health industry superannuation fund HESTA will move to aged based pricing for its insurance cover from March 2018 following a review of members’ insurance needs. The changes are expected to reduce insurance costs by 10 per cent over a working life. 

The new system will operate in two ways. It will tailor premiums to the age of members, resulting in a reduction of premiums for younger people while costs will rise for older people.

The cost reduction for younger people will also be enhanced by reducing the level of cover they receive which in turn also results in lower premiums.

For example life insurance cover for a 20 year old will reduce from $85,000 to $25,000 and the weekly insurance premium will reduce from $1.09 to 16c. For  a 40 year old cover will rise from $84,000 to $85,000 while the weekly costs will rise from $1.09 to $1.18.

For a 60 year old, an age group considered high risk by insurance companies, the cover level will remain unchanged at $17,100 but costs will rise from $1.09 to $1.30 weekly.

More detail on the new system is provided in the following table.

“These changes are designed to ensure HESTA members have the cover they need while retaining their ability to grow their super balances for a comfortable and happy retirement,” HESTA CEO Debby Blakey said.

 “For many of our members, the cover they receive through their super may be the only personal insurance cover they have.It’s why we have restructured insurance provided through HESTA to reflect where members will be in life.”

Prior to the changes, HESTA conducted a detailed review of its insurance arrangements, seeking input from external experts Super Ratings and Willis Towers Watson to look at the broader landscape and industry trends.

“We believe we’ve reached the right balance between providing appropriate insurance cover and ensuring insurance fees do not erode account balances,” Ms Blakey said.

Independent research house Rice Warner analysed the impact of the age-based restructured cover and pricing. They found that under the new arrangements a typical HESTA member who started work at age 22 could pay about 10 per cent less over their working life in insurance premiums for default cover to age 67.

HESTA has retained its Income Protection (IP) cover and is one of the few super funds to offer default IP cover to age 67.

“The most important asset our members have is themselves, and their ability to earn an income. For this reason, we believe providing IP cover is in the best interests of our members,” Ms Blakey said.

HESTA has enhanced its IP cover to include a lump sum of $10,200 to eligible members to help in either their re-education, or refitting their home to cater for a permanent disability as well as other enhancements to the insurance offering.

This lump sum Permanent Incapacity Support Benefit would be available to eligible members in addition to their regular IP benefits.

 “We really wanted to find a way to support members to deal with these often very difficult life changes and aid their potential recovery, including reconnecting with society and work,” Ms Blakey said.

“The great thing about income protection is that it keeps the conversation open around rehabilitation, which is a key pillar of our cover. Programs to assist rehabilitation are part of how we’re building the financial resilience of members by supporting them to stay connected with their networks as this is proven to aid overall wellbeing and recovery.”

The new IP offer also includes

• a 12 per cent increase in the monthly IP benefit
• alignment of the release of insurance benefits for terminally ill members with the 24 month requirement under the SIS Act for access to super, and an improved digital experience for members, and
• an improved digital experience for members.