AustralianSuper will introduce an opt-in arrangement for life insurance for people joining the fund who are under 25, in an effort to stop account balance erosion.
The fund, which has more than 150,000 members under the age of 25, claims the move is an industry first and will save a member, joining at age 15, $637 and will add $1,600, in today’s terms, to a retirement benefit at age 65.
AustralianSuper confirmed to Riskinfo that members under 25 who opt-in to life insurance via the superannuation fund will be automatically accepted. Cover will start automatically for all members when they reach 25.
The changes mean that default death and total and permanent disability insurance available through the fund will, from November 2018, be in line with default income protection insurance which starts for AustralianSuper members at age 25.
AustralianSuper Group Executive of Membership, Rose Kerlin, said the opt-in arrangement was adopted after an examination of the erosion of account balances of younger members through automatic default insurance premiums.
Kerlin said insurance mainly beneficial to people who have dependents or financial commitments that may be affected as a result of death or total and permanent disability and the fund found that for claims paid for members under 25, only 10 per cent were paid to financially dependent spouses or partners and children.
Interesting…certainly a hot topic for debate at present, but opt-out death & TPD is mandatory (occupational group discretion aside) under Stronger Super – that hasn’t changed. Riskinfo can you go a little deeper to find out how this is being achieved? On the principle: I can’t dispute most deaths at young ages leave no or little financial burden and claims files bear this out; the opposite is the case with TPD! This may be the thin end of the wedge. I’m not getting excited about a $1600 difference if a member has no means to survive to retirement age.
Here’s a novel idea How about we make life insurance compulsory with a tax deduction attached like third party green slips on our cars ? It’s a sad but true fact that most people don’t take out or even actively search for cover until a close death of a friend or relative wakes them up to the reality of the mess that can be left behind without it
It’s one way to at least start to work on the under insurance issue
I know before you all start it should be optional we are not a communist country and many people would struggle to get it for health reasons but with a little though on product design, limits’ loading etc a great percentage could be covered particularly if they start young. It has to be made more attractive to the consumer or it just won’t work.
Your thoughts ??
I’ve not seen a case where a youthful person with no dependants and passing way too soon has created no financial issue’s to the family surviving. They needed funds to pay last expenses, they needed to pay loans off and more not limited to legals and maybe no will was done?. Any surplus is then used for the good of other family members. say education? The young man whom tragically passed away in a work place accident in Canberra just a few years ago has cost that family much.
As Sue mentions, how much TPD is enough for a young person in our community? Or doesn’t the author and super fund here understand insurance needs?
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