If you’re relying on your superannuation fund for life and disability insurance, there are some big changes happening in the industry that you should be aware of, as well as a new way of getting the coverage you need.
The majority of super funds provide insurance, which is offered at lower rates than if individuals were to purchase stand-alone retail products. This is because industry super funds buy for the group and can therefore take advantage of economies of scale.
Insurance offered through super funds is based on group rates, not individual circumstances, and a standard set of benefits. In the past, this has allowed for lower premiums and, in some cases, higher Automatic Acceptance Levels (AALs), which are the maximum level of cover (amount insured) that is available without the provision and assessment of medical evidence.
However, experts are noting some worrying changes occurring in the industry in recent years.
Insurers rely on the fact that many people who pay for insurance will never make a claim when they calculate their premiums and benefits. But a growing awareness of insurance available through superannuation has led to increasing numbers of claims across all categories, including death and disability and income protection.
In response, many funds are tightening their definition of disability and requiring more stringent evidence for those who claim they are unable to work; lengthening benefit periods and, most troubling of all, rejecting more claims outright.
For example, last year AustralianSuper came under fire for its record on Total Permanent Disability (TPD) claims. For all TPD claims lodged after 1 November 2014, the $82 billion industry fund – via its insurer TAL – will be closely scrutinising the amount of retraining, reskilling and rehabilitation undertaken by members. Fund members can expect to be held to account on: “What re-skilling, training or voluntary work” they have already done; “any retraining or reskilling [they could] reasonably … be expected to do”, and “any rehabilitation [they] have done already or any rehabilitation [they] reasonably could be expected to do”.
“The point of the new TPD definitions is to limit the amount of successful claims,” said Will Barsby, a partner at Shine Lawyers in Queensland, which represents 900 clients who have had their TPD claims denied – two hundred of those being AustralianSuper members.
AustralianSuper is not the only one either. ""The biggest fund that we pursue for clients that have been unable to return to work is SunSuper,"" Barsby added.
Multiple court judgements have found insurers and the superannuation funds they partner with tend to ‘cherry pick’ evidence in order to deny claims.
While claim acceptance is decreasing, premiums are on the rise. In 2014 the Australian Financial Review noted that death and TPD insurance premiums were up across the industry by 35% and forecast to move up again within a year's time.
Fortunately, there is a means for betting better, more individually tailored insurance through your super fund.
The solution: Partial Fund Rollover
Partial rollover funding can now be used to fund individual retail insurance from any super fund. What’s more, some providers offer a 15% upfront discount for paying through your super.
- Partial rollovers will be accepted from any complying super fund
- 15% upfront Tax Rebate Benefit (discount) for all partial rollovers from some providers
- Full cover usually applies during rollover process
- Insurers facilitate the rollover on client's behalf
- Majority can be funded from existing superannuation
Benefits of personalised cover
Cover that is tailored for your needs, not just the group’s, can not only bring greater certainty of claim acceptance but also other benefits:
- Cover level can be guaranteed renewable. i.e. it will not decline with age
- Cover can be ‘own occupation’ rather than 'any occupation', providing a greater level of certainty and coverage for partial TPD
- Income Protection now an agreed value
- Benefit periods can be up to 65 years, rather than 2 years
- 3-tiered definition of total disability gives ability to work and continue a full claim
- No limitations on working during waiting period
- Access to other benefits may also be available, such as Nursing Care Benefit, Counselling Benefit, Rehabilitation Benefits and Specified Injury Benefit
For more information or advice call us on (02) 8268 2900 for an obligation-free chat.