Super debate turns to insurance
While insurance premiums are in the spotlight because of an attempt to reignite debate over fees charged by superannuation funds, research has found consumers’ propensity to switch funds has changed little over the past 12 months.
Chant West Financial Services principal, Warren Chant yesterday reiterated concerns over the fees charged by superannuation funds, but extended his criticism to premiums charged for insurance.
Chant claims the cost of identical cover varied in some cases by thousands of dollars and was “at least as great as the variation in management costs”.
He said different funds made different allowances for factors such as age, gender, occupation and smoking status.
“For example, some funds load their premiums more for blue collar workers. Others, especially public sector and industry funds, ignore gender and smoking status (and in some cases occupation) and base their premiums and/or benefits on age alone. That means members who should in theory be paying more (male, blue collar smokers, for example) are being subsidised by other members who should in theory be paying less (for example, female, white collar non smokers).”
Chant said such cross-subsidy was less common in master trusts, which generally took the main risk factors into account.
However, he added master trusts typically built profit margins into their premiums and included adviser commissions even if no adviser was involved.
Meanwhile, a Mercer survey released this week has found consumers are not significantly more or less likely to switch superannuation fund than they were in September 2005, three months after the super choice regime was introduced.
The online survey of 865 people found a total of 84 per cent were unlikely to change funds, or were stable or reasonably stable in their funds.
This compared with 86 per cent in December 2005, 82 per cent in September 2005, and 76 per cent in June 2005, shortly before the regime began.
The proportion of fund members likely to, or considering a change has also remained stable since September 2005, with slightly more individuals saying they intended to change before they were actually able to do so.
Mercer business leader David Anderson attributed the stable results to members having made up their minds and settled on new funds in the first months after the change, and the gradual reduction in Government advertising, which meant super choice was no longer ‘top of mind’.
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