Industry funds hardest hit by Budget changes
Members of industry superannuation funds are facing the biggest insurance premium increases resulting from the Government’s Budget changes to superannuation impacting low balances and making insurance ‘opt-in’ for those aged under 25.
New research undertaken by actuarial research house Rice Warner and presented to the Senate Economics Legislation Committee has revealed that insurance premiums will rise for all types of superannuation funds, but industry will be worst affected.
The Rice Warner research has shown that all sectors will face an increase in premiums for both benefit types and genders.
“We estimate that overall there will be a 7.4 per cent increase in premium rates with a 6.6 per cent increase in death rates and 8.2 per cent increase in TPD rates,” the Rice Warner analysis said.
It said it estimated the Industry Fund sector would have the biggest premium rates increase of 8.8 per cent since it had the highest combination of the degree of cross subsidisation and impacted membership demographics.
Public sector funds had the smallest estimated increase of 3.4 per cent because the sector had the lowest level of inactive, young or low balance members and a relatively low level of cross subsidy.
While acknowledging that only about a quarter of superannuation funds offer income protection (IP) insurance cover, the Rice Warner research suggested an expected average premium increase of 20.8 per cent.
The company said that based on its analysis and the total premiums in the market, it expected that the overall impact of the Federal Budget on opt-out premium rates would be an increase of 11.1 per cent.
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