ASFA blames legislative changes for superannuation insurance downturn

Legislative changes blamed for superannuation insurance downturn.

Since 2018, there was a notable 36% decrease in the number of of insured Australian lives for death benefits through superannuation, reported the Association of Superannuation Funds of Australia (ASFA).

A contraction was spotted in the number of people insured against total and permanent disability (TPD).

“Group life insurance plays a critical role in the superannuation system, providing affordable and cost-effective cover that delivers real benefits for those whose working life is cut short by accident or illness and their families,” said ASFA CEO, Mary Delahunty.

Legislative changes such as the protecting your super (PYS) and putting members interests First (PMIF) measures heavily influenced this decline.

“Legislative constraints introduced in 2019 have created a situation where many Australians, including young people, are now without insurance cover, with the near complete lack of default TPD cover for those aged under 25 a concerning issue that may have broader ramifications for the welfare system,” added Delahunty in a press release.

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Whilst aggregate premiums paid by fund members decreased, some individuals or their beneficiaries suffered significant losses in terms of foregone benefits.

The impact on the Australian community included 5,000 sets of beneficiaries missing out on payments totalling AU$665m in aggregate in 2022-23.

Without the PYS and PMIF changes, there would have been an additional 11,000 individuals annually receiving around AU$1.5b in TPD benefits.

There has been a notable increase in the incidence of TPD claims, likely driven by mental health issues. ASFA plans to convene a dedicated policy working group to explore ways to meet the ongoing insurance needs of all Australians, including young Australians.

The report underscores the importance of addressing the evolving insurance landscape within the superannuation sector to ensure adequate coverage for all Australians, especially in light of legislative changes and emerging trends in insurance claims.