Opting out of super insurance set to raise prices for all
Income protection costs could go up by as much as 20.4%.
As part of the Protecting Your Superannuation Package proposed in the 2018/19 Federal Budget, the government announced a raft of changes that will be coming into effect from 1 July 2019, changes which according to Rice Warner, will see the cost of insurance skyrocket.
What's changing?
The proposed changes mean that those under 25, people whose super balance is less than $6,000, and accounts that have not had a contribution in 13 months or more will no longer be given insurance as default through their super. Instead, insurance through super will be entered into on an opt-in basis.
The Rice Warner report Federal Budget Impact – Insurance, says that while Rice Warner supports the objectives of the changes, the opt-in and -out method will have a negative impact on premiums for those who choose to keep cover.
"Rice Warner, while supporting these changes, does believe that default premiums will increase for death, Total and Permanent Disability (TPD) and Income Protection (IP) due to various factors, in particular the change in the demographic basis of the insured superannuation membership," the report read.
Specifically, Rice Warner estimates that the cost for death insurance will increase by 6.6%, total permanent disability by 8.2% and income protection to go up by a whopping 20.4%.
"Based on our analysis above and the total premiums in the market, we expected that the overall impact of the Federal Budget changes on opt-out premium rates would be an increase of 11.1%," the Rice Warner report said.
Rice Warner is not the first to raise concerns about increasing costs. In June 2018, KPMG warned that premiums for insurance through superannuation could jump as much as 26%.
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