Insurance inside super under threat – Mercer | Australian Markets

Insurance in superannuation is under threat with protection charges having shrunk to a level the place solely 50% of members are lined, in accordance with new analysis into the Australian superannuation system launched by Mercer.

The analysis factors to the advantages of insurance coverage in superannuation together with that funds paid members $7 billion in insurance coverage advantages towards a backdrop of $6.5 billion in premiums to 30 June, final 12 months, however says the system under threat as a result of of scale and affordability.

What is more, the analysis suggests the issues going through insurance coverage in superannuation are largely owed to Government coverage modifications.

It stated that whereas the problems going through the regime are “multifaceted’ they have “largely been the consequence of the introduction of Protecting Your Super (PYS) and Putting Members’ Interests First (PMIF) packages, which restrict the members who can be provided insurance by default”

“We expect further challenges, with ASIC and APRA placing a firm focus on enhancing the insurance experience for members,” the Mercer report stated. “On balance, insurance in superannuation is often seen as falling short of expectations, despite several clear areas (and cases) where its inclusion has added significant value.”

“We consider insurance in superannuation to be at a turning point, with funds often viewing insurance as a supporting part of product and proposition rather than a core aspect,” it stated.

The Mercer report outlined some of the challenges going through superannuation funds in delivering insurance coverage, not the least of which being the truth that there are actually fewer suppliers.

“Consolidation in the market means that three insurers now service 60% of funds and receive 78% of premiums,” it stated. “This presents a challenge in that it makes it difficult for competitors to operate. Funds will need to confront the reality of fewer providers.”

The Mercer report stated it anticipated two cohorts to emerge – funds for which insurance coverage is considered a compliance function and funds that use it as a level of differentiation.