Super funds hedging group insurance bets
Superannuation funds have hedged group insurance bets in the face of the continuing uncertainties surrounding the COVID-19 pandemic and in the face of income protection premiums which have risen by anywhere between 30% and 70%.
Another factor in rising premiums was that there were fewer players in the group the market.
A Financial Newswire superannuation roundtable has revealed that both funds and their insurers are concerned about the long-run implications of the COVID-19 pandemic and how they are likely to impact insurance premiums.
TWUSuper chair, Nick Sherry said that the uncertainty had prompted his fund to roll over its contract with its insurer for only a year to help it deal with the uncertainty.
At the same time Deloitte’s Russell Mason said that he was aware of funds which had faced increases with respect to Income Protection insurance of between 30% and 70%.
“Uncertainty around long Covid and seen a dramatic increase,” he said. “Mental health claims appear to have been exacerbated by lockdowns – income protection is the type of insurance that is hurting.”
Mason said trustees were working hard to educate members about cover and the cost of that cover and the potential for it to eat into a large slice of their balances.
NESS Super chief executive, Paul Cahill said that his fund had just gone through the process of changing insurers and that there had been premium rate increases with respect to IP, Death and Total and Permanent Disability (TPD).
“Pricing is going up 20% across the board, death and TPD gone up because there are less players in the market and there are Covid issues which haven’t presented yet,” he said. “The insurers are pricing the risk forward. The tail of Covid hasn’t appeared yet and they’re pricing accordingly.”
However, Cahill said that benefits of insurance in superannuation came to the fore when a wife received a death benefit and realised she could stay in her home.
NGS Super acting chief executive, Natalie Previtera said her fund took the view that insurance inside superannuation was important to maintain despite the increased cost.
She acknowledged that in a bid to contain cost, the fund had recently reviewed the terms of its cover and had changed income protection from five years to two years.
“We are confident that there will be no deterioration in outcomes and that we will continue be able to deliver at cost,” Previtera said.
Would be interested to know whether the funds pass on the actual cost to members for insurance or place a loading on it,