The research, conducted by Rice Warner, found the opt-in insurance model proposed by both the federal budget and the productivity commission’s superannuation efficiency draft report would result in individuals’ retirement balance increasing by only $1,400, or 0.27 per cent.
“AIA considers this to be inadequate when considering that life insurance claims and benefit payments for under 25s are growing each year, and that the proposed reforms would be offset by the potentially devastating physical and social impacts a member would experience in the event of a serious injury or illness,” AIA said in a statement.
AIA Australia and New Zealand chief executive Damien Mu said the research casts doubt on the effectiveness of a change in group insurance arrangements.
“This data raises legitimate questions as to the value of such reforms, where members will forgo valuable protections for a minimal financial gain in retirement. The cost savings are inadequate when considering the increased health and financial risks for under 25s,” he said.
“There are unintended consequences to these measures, including that premiums for remaining insured members will increase across their working life.”
Old Risky – the bit that’s important is the reason why cover for under 25’s is to be removed. It was to ensure the members had more at retirement. The analysis was undertaken by Rice Warner and shows that the impact is immaterial – less than 1% difference or $1,200 in today’s dollars when they retire. The potential for significant personal tragedy is lower for those under 25’s, but the impact to those that suffer it is significant. Surely sacrificing 1% of your retirement outcome to protect against this risk is a fair trade.
Talked to any under 25s lately? Regardless, they do not care, but funny enough their girlfriends go looking if the bloke die. I feel for the parents, who suddenly become full time carers chasing $250k of TPD if the kid becomes a quad/para in an MVA. But that does not deny the under 25 class is a goldmine for insurers
I think the removal of default cover to under 25s is an excellent initiative (and I work in fin services), but some of the other budget changes are crazy and will never work in practice. No cover till a members hits $6k? That means they could not have insurance for a year or two. Also the 13 month inactivity rule is going to really hurt those with large balances who are travelling, on a career break, sole traders, mums etc. For these members there is no erosion issue but the govt is suggesting removing cover for them anyway? Not very well thought through. Lets hope the final version of the legislation is more sensible.
Seems they have a conflict. Talk about a vested interest. The facts are that the under 25 section of group super insurance is money for old rope for the insurers and Trustees, you cannot fool the hardheads at the Productivity Commission. Yes there might well be an increase in under 25 claims, but how low was the base? And the ATO loves it also-picking up tax on death benefits paid to Mum or Dad