Cbus Super has reduced the unit pricing of its default group insurance premiums by 25 per cent.
Under the new policy, which will come into effect on September 30, the premium rate for total permanent disability (TPD) and death cover will drop from $3.58 to $2.68, per week.
This has been achieved by negotiating a 44 per cent reduction in the cost of the TPD component of the default cover.
The construction industry fund has also further reduced total group insurance premiums for members between 15 and 20 years of age by dialing down the volume of their default death cover, from two units to one.
The need to reduce insurance cover for younger members to keep premiums from unduly eroding low balances has been a focus of the Parliamentary Joint Committee into Life Insurance.
Cbus head of insurance Noel Lacey explained to Investment Magazine that the decision to dial down death cover for members under 21 came in response to both hard data and what members had been requesting.
Fund data shows that when members aged 20 or under die, their death benefits do not typically go to a financial dependant, indicating these members have less need for the same level of death cover as older members.
Meanwhile, fund engagement surveys have clearly shown that members under 21, who are often on apprentice or trainee wages, want lower premiums.
The price reduction from September 1 will bring the fund’s group insurance premiums closer to levels not experienced since 2012. In 2013 and 2014, Cbus experienced a spike in claims, which was followed by soaring premiums for members.
Lacey said part of the reason for the 2013-14 spike was that a massive effort by the fund to better educate members about their insurance entitlements had led to a number of back-claims being lodged and processed in just a couple of years. This has now mostly been worked through and the claims experience is expected to be “less lumpy” going forward, he said.
Cbus chief executive David Atkin unveiled the new deal at the fund’s annual member briefing in Melbourne on Thursday, July 6, 2017.
“Cbus, through our partnership with TAL, is delivering insurance that meets our members’ needs on a cost, coverage and accessibility basis,” Atkin said. “Our members work in some of the toughest conditions of any industry, which is why being able to access affordable insurance through superannuation is important to them.
“Our view is insurance cover for members is important and valuable and our philosophy is that legitimate claims should be paid. Over the longer term, about 80 per cent of our TPD claims have been paid. Together with TAL, we are also making process changes that significantly improve the member claims experience, recognising that issues around communication and administrative processes need to modernise to reduce complexity and frustration for members.”
The $38 billion default fund for the construction industry has 742,000 members.