Group insurance within super funds

Posted 16 August 2016


Group insurance arrangements within superannuation have attracted some further attention in the media recently. Central to much of the negative coverage is a general rise in insurance costs (and the associated effect on members’ retirement savings), coupled with increasingly narrow policy terms across a number of superannuation funds.

Historically, some super funds have relaxed eligibility criteria for members to receive death and total and permanent disablement (TPD) cover automatically (or by default). As a result, these funds have seen increasing claims costs over time, leading to increased premium rates and/or tightening of definitions by which members can make a TPD claim through their super-based insurance.

Pleasingly, this has not generally been the experience for members of our fund, who have group insurance arrangements through their Accumulate Plus account.

This stems primarily from the fact that we are a corporate super fund, so our membership not open to the general public. This plays an important role in our insurance arrangements, as members who do receive cover automatically are generally restricted to permanent full-time employees of the Commonwealth Bank Group who join the fund at the time of hire. This means that the pool of members covered by our insurance arrangements continues to grow and provide good economy of scale for us in negotiating our insurance premiums, but our membership and default cover criteria does not expose us to the same level of risk as a public-offer fund.

While other members (including those not eligible for default cover) can apply for voluntary cover in Accumulate Plus, this is generally subject to the insurer’s underwriting and approval process.

From a member-cost perspective, the result is that while many funds have been under pressure to increase their insurance costs, premium rates for death and TPD cover in Accumulate Plus decreased by around 20% in 2014.

Over a number of years, we have also worked with our insurer on the terms of our policy, to ensure that cover was provided in a more equitable way. This has included removing a pre-existing condition clause from default cover, moving to gender-based premium rates and better defining cover for self-employed members.

While some funds have also imposed more restrictive policy conditions on TPD claim eligibility, this is not something that we have considered. Our TPD definition aligns to the definitions of disablement required by super law.

For more information, visit the Insurance section of our website or refer to the Member Guide (PDS) and Reference Guide: Insurance cover for Accumulate Plus.