Research house DEXX&R’s Market Projections Report projected total group insurance premiums for the year to fall by $226 million by December 2020, as Australians continued to withdraw funds from their super accounts.
The group said around 660,000 fund members were predicted to lose their insurance cover as a result of their account balance falling below the threshold for premiums to continue to be deducted.
“It will be several years before many of these members again have a balance at a level where they are eligible to receive default insurance cover,” DEXX&R said.
As a result, growth in the group insurance market was expected to be flat for the foreseeable future, with lump sum in-force premiums growing by just 1.8 per cent per year until 2029. New annual premiums were projected to fall by 11 per cent per year to $284 million by December 2029, down from $860 million in December 2019.
“The lower projected lower growth rates for both new and in-force group premiums reflect the impact of the COVID-19 super early release scheme, higher unemployment leading to a reduction of in the number active accounts eligible for automatic cover on an opt-out basis, and slower growth in account balances as the result of underemployment with little or no growth in wages and salaries over the next five years,” DEXX&R stated.
Moreover, the assumptions in the group’s modelling included the legislated increases in the super guarantee, which the government flagged this week may not go ahead.
The report stated that if the SG was not increased, growth in the group insurance market would be “further reduced”.
Meanwhile, the group said the impact of the crisis on the retail risk market would be “minimal”, with “a small impact” arising from clients taking out benefit suspensions while their working hours were impacted by lockdown periods, and further lapses expected to flow through as unemployment rose in the years following the crisis.
“Existing pre-COVID issues faced by insurers are expected to have a greater impact on subdued growth in new and in-force [retail] premiums over the next five years. These issues include a fall in number of advisers actively recommending risk products,” the report stated.
DEXX&R projected in-force term life and TPD premiums in the retail channel to grow by 1.5 per cent per year to December 2029, while trauma in-force premiums were expected to grow by 1.5 per cent per year and disability income in-force premiums would grow by 2.6 per cent per year.
I call BS, the insurance was gone way before they accessed super. it was cancelled due to legislation and legislation only – no contributions in 16 mths or under $6k in a crappy super fund…… and yep I love my jetski would rather spend money on something I enjoy then watch the government change rules that would make me dead before I can access the money…..
1. Commission on Group policies within Super were abolished more than 7 years ago under FOFA. So there is no loss of commission to super funds due to people losing their life insurance cover. Losing admin fees has nothing to do with losing insurance.
2. There is no evidence that having default cover makes people not look to having appropriate levels of insurance (i.e. correcting underinsurance). Home Insurance has no default cover, but only around half of homeowners have a proper level of insurance for their home and contents (according to Canstar). Nearly a third have no insurance at all. And for Life Insurance, where there is default cover, also around half have a proper level of life insurance (according to Rice Warner). So having access to default cover does not make any real difference to whether people have proper levels of cover (i.e. are underinsured or not) – there are those who think about it and will have proper insurance cover levels, and those who don’t. But at least with default cover, those who don’t think about it would have something to cover them should they need it. It mat not be as much as they need, but they would never have had anything without default cover anyway.
3. Around half of claims paid on life cover under group policies goes to people who would not have qualified for retail cover when the received their default group cover due to pre-existing conditions. So having no default cover means no cover at all, ever, for that group. How does not having access to default cover under super funds help them when they can’t access retail cover anyway?
This is no bad thing. Default insurance in super is a CAUSE of under insurance. It is not the solution. Most people don’t bother to insure themselves properly “because my super has insurance”. Little do they realise their super only has small amounts of insurance and probably has the wrong product types for their needs.
Default insurance in super creates a false sense of security. Getting rid of it is a positive step towards people insuring themselves properly.
Seriously?
I have had many people totally oblivious to the cover their super may or may not have provided. Most will assume they are covered because the alternative is…they’ll have to pay for cover they thought they had. I guess some would rather just not know…hence the great rush to withdraw everything from their super without considering that a zero balance means no cover…or perhaps they didnt care?
Agree that most people are oblivious to the details. But they think they are “insured”, when in most cases they are far from properly insured. Having some insurance in super is a mental excuse for not having to take personal responsibility for their insurance. Much better to remove the excuse.
Said another way, disinterested members have reduced super fund income by $45,200,000 p.a.. in lost insurance commissions (226 Mill at 20%) and atleast $46,800,000 p.a. in admin fees (650,000 at $72 p.a. not including the % fee as well)
I really can’t put my finger on why super funds are so concerned with this???
Probably because insurers will again need to increase premiums when the current 3-year contract (AustralianSuper annually) expire. Less members paying premiums equals higher premiums for members remaining with insurance. The last two sets of premium rises has been 30+%. Expect another rise along that scenario.
Who needs insurance when you’ve got a new jetski or new kitchen?
When you crash the new jet ski into the jetty or the submerged rock or log at 90kph it will most likely be a TPD claim or potential death claim………but hey, the new jet ski was $20,000 and the insurance cover under the super fund was only
$500 p.a……..you need to get your priorities right !!
After the crash, the jet ski is worth nothing, but if you let the insurance go, so is the value you have placed on your life or your continued capacity to work and generate income.
You simply cant protect stupid people making stupid decisions.
Or put food on the table mate. How dare you stake that stance clearly demonstrating your person privilege and lack of empathy for other less fortunate. It might not be consequential to you, but to some, this is money that can be used to put food of the table, finally put those new tires on the car and get it insured, pay some rent, pay some mortgage and just maybe, while you are sitting at home with no work, have a quite beer and for once.
But I guess you know better?
Have you seen the data on where people spent their money?
The amount spent on gambling alone was frightening.
But yeah, for the minority who have actually used this for the necessities of life, that is exactly what this was for.