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Government investigates insurance within super

The Productivity Commission has released a report aimed at investigating whether the costs of insurance within superannuation are competitive and efficient.

The commission proposed in its draft report, How to Assess the Competitiveness and Efficiency of the Superannuation System, to assess whether the cost of insurance is being minimised, using quantitative indicators focused on member insurance costs and prices.

“The premiums or ‘price’ of insurance within superannuation are typically considered to be significantly lower than for comparable cover obtained through retail products outside of superannuation,” the report said.

“This is attributed to multiple factors such as tax advantages, low-cost distribution, simple product design and bulk purchasing.”

The commission noted that, in an efficient and competitive system, trustees would seek the best deal for their members from the most competitive insurance provider.

However, it questioned whether insurance prices are competitive from an individual’s perspective, noting that it would depend on their circumstances and risk profile.


The report said many people have the same type of insurance cover across multiple super accountants and duplicate insurance policies can erode any cost advantage otherwise received.

“The persistence of duplicate insurance suggests that some people have more cover than they require and are unnecessarily eroding their retirement balance,” it said.

“This risk is greater where there is member disengagement and/or a lack of knowledge about cover, including due to poor disclosure of information.”

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