Claims Are Not Rare Event – ASFA

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Life insurance claims were not rare with around 1 in 20 people making a TPD or death benefit claim, according to the Association of Superannuation Funds of Australia (ASFA), which also claimed group life was a better vehicle for people to secure insurance.

The representative body made the claims as part of a new report which examined the benefits of life insurance in superannuation and stated the total benefits paid by superannuation funds to members was about $5 billion.

The author of the report, ASFA Director of Research, Ross Clare said without the death, disability and income protection insurance offered through superannuation many people would have no insurance protection at all and the likelihood of making a claim was not a rare event.

Clare said ASFA had analysed claims data and found, over a working life of 40 years, a super fund member with an income protection policy had a 25 per cent chance of having a benefit paid because of a temporary disability or medical condition.

“The burden of under-insurance on society and government resources would be significantly greater without insurance in super”

Additionally, over the same time period, around five per cent of fund members will claim a Total and Permanent Disability benefit and around five per cent will have an insurance policy death benefit paid to a beneficiary or to the individual in the form of a terminal condition payment.

Clare also said superannuation funds paid around 16,900 TPD benefit payments in the 2015-16 financial year and dealt with more than 18,500 life insurance claims and nearly 37,000 income protection claims in the same period, adding that insurance through super still provided better and less expensive cover than policies held outside super.

“Premiums for a given level of cover are lower across age categories between 30 to 60 years, for both genders,” Clare said, adding the difference in premiums ranged from 25 to 55 per cent, and for males, ranged from 35 to 60 per cent, dependent on age.

“The burden of under-insurance on society and government resources would be significantly greater without insurance in super,” Clare said, “It reduces the level of social security benefits payable due to a lack of coverage. Currently, under-insurance in relation to death, TPD and income protection costs the government more than $1 billion annually in additional social security payments.”