The country’s biggest superannuation fund has signed on to the Insurance in Superannuation Code of Practice, and made bold changes to prevent account erosion for low-income members.
At AustralianSuper, we have announced changes to our group insurance offering that reflect our commitment as the first signatory to the Insurance in Superannuation Code of Practice.
These changes are the scrapping of default insurance for under-25s and introducing a new Super Only product for members employed under the Supported Employment Services Award and seasonal or intermittent employees working less than six months.
AustralianSuper already exceeds many of the minimum standards the code sets out but we are constantly working to go even further for our members.
This includes already meeting most service levels outlined in the code in relation to claims; and where we are not up to the code’s standard, we aim to be there by the end of 2019 – more than 18 months ahead of the timetable.
The average cost of default insurance provided to our members equates to about 0.8 per cent of their lifetime salary, exceeding the code’s target of 1 per cent or less.
While the code was being developed, AustralianSuper was rolling out a new rehabilitation model that has helped almost 200 members who were on income protection payments return to the workplace in the last 12 months.
In February, we were able to announce the fund will be delivering even better value − especially for young members – without any reduction in cover.
From May, AustralianSuper’s insurance premiums will decrease, resulting in members paying $100 million less in premiums over the next financial year.
Premiums will decrease by an average of 14 per cent for death cover, 6 per cent for total and permanent disability and 20 per cent for income protection.
These reductions will apply to the overwhelming majority of members who hold an insurance policy via the fund. No member will pay higher premiums.
Fit for life stage
From November, there will be no default insurance for new members joining the fund who are under the age of 25.
We have made this change to help address account erosion for young people.
Life insurance is primarily of benefit to people who have dependants or financial commitments that may be affected by death or total and permanent disability. With people getting married or having kids later in life, we need to adjust our assumptions about what people need at various stages in life.
Our data shows that of claims paid for members under 25, only 10 per cent go to financially dependent spouses or partners and children.
In light of that, it is important to weigh up the benefits of insurance against the cost. People under 25 starting out in the workforce tend to be on relatively low incomes and need to be building a base for their retirement savings. By not defaulting members aged under 25 into group insurance, we will reduce undue account erosion due to premiums on policies that are likely to be of very limited value to them.
When this change happens in November this year, we will roll out a multi-channel communications campaign to educate affected members about their insurance options and make it easy for them to opt-in or change their coverage.
The Super Only product, for employers who have employees on very low incomes and seasonal staff, will ensure there is no erosion of those members’ accounts from premiums.
Affordable and appropriate insurance provides members and their families with peace of mind and support. AustralianSuper provides insurance to roughly 1.4 million of our 2.2 million members.
Over the last 10 years, the fund has paid more than $2.6 billion across 45,000 claims to help members and their families. It pays about $500 million in premiums each year and expects to pay insurance benefits to 25,000 members over five years.
As the country’s biggest super fund, we have the scale to provide the best cover by negotiating bulk rates.
Our focus is on providing the most appropriate and best value insurance options.