Government moves could lead to super fund premium increase

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The Australian Prudential Regulation Authority (APRA) has warned that the Government’s Budget proposals to tweak superannuation rules will likely lead to funds charging higher premiums.

Proposals in relation to low account balances and making insurance within super ‘opt-in’ for under 25s could translate to higher fees for all fund holders.

Speaking at the Senate Economics Legislation Committee last week, APRA deputy chair Helen Rowell indicated the proposals may lead to a premium increase to cover extra operational risk for super funds and administrators.

“The precise impact of the insurance proposals is difficult to assess at this time; however, it is likely that the removal of these members from the ‘default’ insurance pool (together with the removal of members with inactive accounts) will create upward pressure on premiums for the remaining insured members,” said Ms Rowell.

“Members impacted by the insurance proposal will need to be made fully aware of the changes to enable them to appropriately consider their insurance needs and the consequences of not opting-in to insurance. Effective member communication is, therefore, paramount.

“To implement all of these proposals, funds will need to work closely with their administrators and insurers to ensure the required system changes and amendments to group insurance arrangements are in place,” she said.

“This will be challenging to achieve by the proposed implementation date of 1 July 2019 given both the complexity and extent of the changes that will be required to be made across the entire superannuation sector.

“In particular, insurance arrangements will need to be reviewed and re-priced (taking into account actuarial input), underwriting processes reviewed, and contractual arrangements re-negotiated accordingly. These processes can be highly complex and time consuming for individual superannuation funds and will be even more so when the industry as a whole is impacted.

“Sufficient time also needs to be allowed for effective communication to members of the changes that are being made, their expected impact and the decisions that members may need to make (particularly in relation to insurance). This in turn will require certainty in the final legislative requirements so that the nature and extent of the changes to insurance and fees can be determined by each superannuation fund, in collaboration with their service providers and to ensure funds’ current disclosure obligations are able to be met.

“APRA is therefore concerned that unintended consequences may arise for members and there will be significant pressure on, and heightened operational risk for, superannuation funds and their insurers and administrators, if sufficient time is not allowed to implement the proposals in an appropriate and orderly manner,” she said.

APRA’s warning follows similar signals sent out last month by accounting firm KPMG.


Do you have insurance attached to your super? Would you opt out if you could? Do you think it’s fair that all fund members should have to foot the bill for those who do opt out?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?



Total Comments: 24
  1. 0

    One of my main bug bears when I was still working and contributing to superannuation was the insurance component that I had to pay, the minimum insurance component was 3 units at $3:67 per unit, the amount of return was age based, meaning when you were young the pay out was massive as you aged the payout reduced to almost nothing, now some might think that that situation is ok, I didn’t, if I had paid the same amount into a private life insurance policy I would have known the exact amount I would recieve on my departure, and that amount would be the same no matter when I died. I always believed it was an unfair system that tied me into a particular policy with no option to opt out.

    • 0

      Good point Jim. Very unfair system. So you retained the 3 units at $3.67 per unit but, as you aged the payout reduced to almost nothing.
      Did your price per unit reduced to almost nothing too?

    • 0

      No it didn’t the amount per unit remained the same for everyone, hence my disappointment with the scheme, if you stayed in good health you were discriminated against, that’s the reason you should be able to opt out from the beginning of course, then you could make your own arrangements.

  2. 0

    Just leave it alone, why do these morons stuff up every thing they touch.

  3. 0

    Life insurance should never have been part of super at all. It is nothing but a licence to steal people’s money from super funds.

  4. 0

    ” to cover extra operational risk for super funds and administrators’
    Like what specifically are the extra operational risk?

    • 0

      Fewer people in the pond means higher risk for those that are!

      So premiums rise to cover the risk of having to payout as there are fewer people to divide costs against.

    • 0

      More like to make up the profit they are going to lose when people opt out of life insurance.

    • 0

      Don’t they use reinsurers or is this some in-house business on the side the superannuation funds are running?

      Maybe they could sell wine hampers or house lotteries or something to make up the shortfall haha.

  5. 0

    “This will be challenging to achieve by the proposed implementation date of 1 July 2019 given both the complexity and extent of the changes that will be required to be made across the entire superannuation sector.

    APRA is therefore concerned that unintended consequences may arise for members and there will be significant pressure on, and heightened operational risk for, superannuation funds and their insurers and administrators, if sufficient time is not allowed to implement the proposals in an appropriate and orderly manner,” she said.

    If, 12 months is insufficient time,then the question of incompetence arises.

    • 0

      If they just cancelled all the arrangements that they have at the moment and let people make their own arrangements regarding life insurance then where is the problem, unless of course someone is making a killing out of the enforced insurance scam that is currently part of the insurance industry on superannuation?

    • 0

      Jim you hit the nail on the head. They are making a zillion out of these life insurances that most people don’t need. Yes it is a scam.

    • 0

      Of course, they are making a surreptitious killing, Jim.

  6. 0

    I got rid of all insurance except income protection. Given I have no debt and am now close(ish) to retirement the ‘payout’ for TPD would be minimal, likewise life insurance. And with no debt and no dependents there is no need for all these other insurance policies at my stage of life. I am going to die as are we all, I don’t need to insure against it! My only concern now is protecting income until retirement. And that costs a huge amount for ever diminishing returns should it be needed.

    • 0

      I don’t even need income protection. I now travel the world without travel insurance because no insurance company will insure me. That’s right they only insure healthy people.

  7. 0

    Fair enough. Those who want the insurance should pay for it

  8. 0

    Funny that APRA hasn’t warned that it’s Bail In Legislation may confiscate huge wads of our money if anything goes wrong with the housing market or the interest rates.
    It’s very selective.

    It is also very easy to opt out of insurance and select a fund with low fees and charges and no advisors being paid commissions each year.

  9. 0

    A few years ago I was losing well over half of my super which was then with MLC.
    MLC were still charging me thousands of dollars each year whilst losing over $100,000 of my superannuation fund.
    My financial adviser closely tied with MLC did nothing.
    A lot of funds were locked in and could not be extracted till many years later at a huge loss.
    I consider that the whole private superannuation scheme started by Keating has been a massive loss to all working Australians not just me.
    Of course the money was not really lost but ended up making some other companies and share traders even richer
    I dare and challenge the committee to calculate and publically declare the total money loss to all the Australian superannuation contributors over the last 10 years.
    I strongly suggest superannuation be allowed to go into the Australian Future fund which has done so much better than any and all of that bunch of merchants pirates who lied and called themselves good superannuation companies on TV whilst I and other were losing billions.

    • 0

      Pity you can’t sue the adviser. I took a look at MLC back in 2005 and was horrified by the fees and percentage of profits they wanted. There were hefty commissions too.

      Hope you tore strips of that adviser and demanded they return the commissions to you.

      This is the problem with trusting these people. You can’t.

      I suggest superannuation is a crock and that those who end up well off would have anyway and the rest just spend the lump sum and go on the pension like they would have anyway and the only difference is the billions of dollars we are paying the finance industry.

    • 0

      I was never a big fan of Keating, but I have to disagree, the superannuation guarantee was the best thing that was introduced for the working man, it certainly put me in a better position in retirement, the problems accociated with some of the criminal acts of some financial advisors is a different matter altogether, some of these companies and their advisors should be having a nice long holiday at the expense of the prison authorities.

    • 0

      Yep Rae – was one of them; but super helped me to retire before I was 65 and self funded and now here comes the pension. Only fools and millionaires want to be SFRs in my book. None of my mates are!



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