Insurance and You
By John Grocke
The past 12 – 18 months has seen the largest shake-up in the Insurance industry for a long time. All participants including large Industry super funds have seen rates increase significantly.
The background to why this is happening is due to an increase in ‘claims above projections’ with a large part of them coming from mental health related issues and cancer. These two categories presently account for around 70% of Income Protection claims in the Industry at present.
Another contributor has been automatic cover which is widely available regardless of a person’s health status. It means superannuation funds have taken on a greater number of non-standard lives than was allowed for in the rates being charged. Insurers were also keen to acquire market share and offered rates with discounts that in hindsight were too generous.
So what has this meant for you? Well the down side to this has been large rate increases across the Industry, in some cases as high as 50%, which many members will not be aware of until they receive their transaction history in June statements this year.
It has also meant funds need to look at ways to limit premium increases which has led in some cases to definitions being ‘watered down’ so that some claims will not be admitted in the future.
What should you do if you are someone seeking insurance? The best thing would be to research around the type of cover in place as this is more important than it previously was. You may think you are covered but the actual cover may fall short of what you expect.
One advantage to come from this is that most super funds (excluding Sate & Commonwealth Super Funds) now allow an individual to have a personal insurance policy premium paid for by their super fund. For example a personal Death & TPD policy could be paid for by your Australian Super member account (note: there are some criteria that must be met the TPD part of policy).
One significant advantage for the individual member is they have the option of purchasing their insurance on a level premium basis, where a rate based on age today does not change as you get older. This leads to significant savings over the medium term, compared with paying for insurance based on your age which increases each year.
In summary, check the wording of your super fund policy to ensure the insurance matches your understanding and requirements. If you’re not sure give us a call.