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Superannuation funds are the biggest supplier of life insurance in Australia, providing cover to 11 million account holders, based on a study of 15,000 insurance deals on offer through 220 super products.
Financial services information provider Rainmaker Information said almost all super funds offer life insurance to their members - and these policies are usually much cheaper for members compared to if they sourced insurance themselves, because the funds deal directly with the insurer on wholesale policies.
Life policies bought through super funds have an average price of around $3 per week. However, the price can vary significantly for the same cover based on the profile of the fund membership, the deal negotiated with the insurer, as well as the age and level of risk of fund members.
For super members under 20 years old, insurance cover averages $150,000, while those in their 60s get an average of $28,000. For members in higher risk occupations, 45-year-old members pay from as low as 87 cents per week up to $26.40 per week.
“There is significant variation in the price insurance super fund members pay,” said Stephen Ray, Rainmaker’s head of superannuation research. “While the median premium amount for standard insurance cover paid by a 45-year-old fund member working in a low risk occupation is $3.76 per week, the most expensive super fund charges $11.78. The cheapest funds charge as little as $0.48 per week which is a staggering 25-times less.”
Fay said fund members’ level of risk dictates their premium prices - those “in higher risk jobs will, on average, pay twice as much for their insurance cover as members in lower risk jobs.” Around 50% of super funds vary their insurance cover and premium prices according to the type of job their members have, while around 30% of funds vary their insurance cover based on the gender of their fund members.
The study also noted that while not-for-profit funds, i.e., corporate, public sector, or industry funds,
generally offer higher levels of standard-cover default insurance than retail funds, their products usually come at a lower price. Consequently, the average weekly cost of default cover is lower for NFP funds than retail funds.
“Life insurance is an important core benefit offered by super funds where members can access cost effective wholesale prices,” Fay said. “However, with variation in overall cover provided, premium rates, and weekly cost of cover, there is opportunity to choose an insurance that best fits. Some key comparisons have the potential to save members and their families thousands of dollars in annual insurance premiums.”
