Insurance inside super under threat – Mercer
Insurance in superannuation is under threat with coverage rates having shrunk to a point where only 50% of members are covered, according to new research into the Australian superannuation system released by Mercer.
The research points to the benefits of insurance in superannuation including that funds paid members $7 billion in insurance benefits against a backdrop of $6.5 billion in premiums to 30 June, last year, but says the system under threat because of scale and affordability.
What is more, the research suggests the problems facing insurance in superannuation are largely owed to Government policy changes.
It said that while the issues facing the regime are “multifaceted’ they have “largely been the consequence of the introduction of Protecting Your Super (PYS) and Putting Members’ Interests First (PMIF) packages, which restrict the members who can be provided insurance by default”
“We expect further challenges, with ASIC and APRA placing a firm focus on enhancing the insurance experience for members,” the Mercer report said. “On balance, insurance in superannuation is often seen as falling short of expectations, despite several clear areas (and cases) where its inclusion has added significant value.”
“We consider insurance in superannuation to be at a turning point, with funds often viewing insurance as a supporting part of product and proposition rather than a core aspect,” it said.
The Mercer report outlined some of the challenges facing superannuation funds in delivering insurance, not the least of which being the reality that there are now fewer providers.
“Consolidation in the market means that three insurers now service 60% of funds and receive 78% of premiums,” it said. “This presents a challenge in that it makes it difficult for competitors to operate. Funds will need to confront the reality of fewer providers.”
The Mercer report said it expected two cohorts to emerge – funds for which insurance is regarded as a compliance feature and funds that use it as a point of differentiation.
Frydenberg & Hume / LNP murdered 45% of Advisers with LIF, FARSEA & stealing Grandfathered Comms.
They also killed a big chunk of group Life cover too.
Mass Red Tape Over regulation from these LNP muppets.
Can the LNP be trusted again ?
Only as far as you can throw them….
If a political party forms a consultation group — admittedly influenced by the wrong elements — and then consults with industry representatives who propose recommendations aligned with those elements (just look at a former FAAA staff member who ended up working for them), and all sides of politics agree, can you really blame the sitting political party?
Perhaps it’s time to direct your frustration toward your big AFSL, your fellow advisers, or industry associations that claim to represent your interests.
At the end of the day, Advisers often remain silent, fearful of ASIC’s power to scrutinize them. Many rely on their product aligned AFSL to speak on their behalf, despite the inherent conflicts of interest and a desire for them to create more complexity to increase there value. Meanwhile, they continue paying fees to industry associations whose primary goal seems to be securing new sources of revenue.
The whole personal insurance industry is under threat. Regulators, insurers, and activist groups have all inflicted multiple incidents of unnecessary harm. The industry is now in an irreversible death spiral. Consumers will be much worse off.