According to a Rainmaker Information study, conducted in collaboration with Plan For Life, super fund members can save big compared with buying similar life insurance directly online.
“The study confirmed that super fund group insurance provides a cost-effective option for fund members across all age groups and coverage needs,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
Rainmaker said the study looked at the average premium value of MySuper automatic standard cover default insurance, comparing the cost of buying an age-based sum insured through a super fund versus direct purchase.
It also evaluated the standardised price of insurance cover for death and total and permanent disability (TPD) cover for three standardised sum insured limits, again comparing the average price of super fund purchased voluntary top-up cover versus direct purchase.
The study found that there was a 44 per cent price advantage of default super fund group insurance for death and TPD cover for a 40-year-old.
The price savings were heavily impacted by age, with the annual savings when buying this insurance through a super fund found to range from $150 for a 30-year-old up to $680 for a 60-year-old. Rainmaker said this was due to annual premiums for group insurance decreasing for super fund members as they aged, while the cost of directly purchased life insurance increased significantly.
Giving the example of a 25-year-old super fund member with a sum insured of $100,000, the study found they would pay an annual premium of $118, while purchasing equivalent life insurance directly would cost $218, leading to a saving of $100, or 46 per cent.
Rainmaker added that a 50-year-old would pay premiums as high as $840 for direct insurance, while super fund group insurance would cost an average of $600. While this represents a larger saving in dollar terms at $240, saving it a smaller 30 per cent advantage.
“For a larger sum insured of $500,000, the difference in premiums gets higher in dollar terms,” Mr Dunnin said.
A 25-year-old with that level of cover would pay 37 per cent more in direct insurance annual premiums. The difference in annual premiums hit a low point for a 50-year-old at 8 per cent but the gap climbed back up to 22 per cent for a 60-year-old.
The study only looked at group and direct cover, it did not cover advised insurance clients.
Industry fund and group insurance is way more expensive than retail cover for every client I’ve advised for the past 18 months
There are so many variables to take into consideration with the comparisons that it renders the study as pointless!
This is not the case with advised Life Insurance. Of the 6 examples on my desk today, I have premium differences in every case, with Industry Fund default cover being between 32% and 202% more expensive, than an equivalent Retail Life & TPD arrangement. In addition, the retail offering has a Life Benefit Buy Back included and a period of disability requirement of 3 months, as opposed to no Buy Back and a 6 month disability requirement.
Industry funds compared include Australian Super, Australian Retirement Trust, Q-Super and Brighter Super. This differential has been moving more in favour of the retail offering over time.
My only explanation on what has occurred here is that comparison has been made against the likes of Real, Guardian, etc, not advised insurance. But I can see this being weaponised against advised insurance cover.
This study doesn’t really say much. I am wondering about who will be using this study to push some kind of agenda, probably against advised insurance.
This article has focussed on the default cover which I agree, is usually more economical due to the decreasing nature of the sums insured. However, I would challenge them to compare fixed cover premiums.
I regularly provide comparative quotes from super funds to retail and in 90% of cases, the retail is significantly cheaper.
If Rainmaker are going to provide a comparison, then make sure you obtain and provide direct comparison. And in addition, why would any professional adviser provide illustration for decreasing cover? How about taking into consideration someone aged in their 20’s will most likely marry, buy a home, have children, pay for their education, provide income for their spouse etc……. Very Naive article.
But then again, this will probably constitute “Good Advice”. Heaven help them
Don’t mention the fact it is nigh on impossible to make an effective TPD claim when the policy is owned by the Trustee of an employer fund (the SIS Act all but prevents payment of the benefit is with its current wording and application – not to mention the implications of taxation on the benefit payment – once again devil in the detail) – you the claimant won’t get any two doctors able to certify that this person will never, ever (despite advances in technology) be able to work in any capacity again- TPD in this form is a total rort. – or more properly described as a lawyer’s picnic.
Perhaps the publisher of the article should check the facts before just reprinting someone’s press release. I have found this to be false. I have a blue collar client female, mid 30s who can obtain four times the life cover for the same premium. In the 7 years i have been closely looking at risk, I reckon it is less than 5% of the time that the premiums are cheaper in industry funds. Have you looked at CBUS? Also, as a few other commenters have said, it is comparing apples with oranges to base a comparison on price alone.
this is the most dopey article and highlights a really poor example of comparing apples with banana. Group insurance has a place – but the client never owns the policy – and worse – underwriting is done at time of claim. Whereas personal cover – you have a guaranteed renewable policy. Everyone changes jobs these days – and changes employers and super too. If the risk is the same and therefore the ultimate benefit payable is the same – then if the premium is significantly lower – you are getting a lesser product – significantly better product. to all the aspiring, upwardly mobile people that are reading this – do not think you are talking like with like. Its another fallacy from the home of “compare the pair”
Rainmaker said this was due to annual premiums for group insurance decreasing for super fund members as they aged, while the cost of directly purchased life insurance increased significantly. Decreasing cover!!!
Have they released the research because this is not what I see when I compare industry funds to advised policies. sounds like a good headline paid for by Industry Super.
Agree there
You would have to worry about the team leader of the study group – probably wouldn’t know an insurance policy if you tripped over it. ( Probably the same group of clowns that made the FASEA exam – one size fits all)