Life insurance policies obtained via superannuation funds may see a 30% jump in premiums, due to changes proposed by the government in the 8 May Budget speech.
The proposed changes for life insurance in super could hike the price of premiums due to the mass reduction of younger members, KPMG superannuation partner, Mr Adam Gee, told The Australian.
Under the changes in the proposed 2018-19 Budget, super funds will have to end automatic life insurance cover for new members aged under 25, encouraging members instead to opt-in to receive life cover. Super accounts that have not had any contributions for 13 months will now also have their cover scrapped, while cover for members with less than A$6,000 ($4,480) in their accounts will become optional.
The move is also expected to shave A$3 billion off in premiums the life insurance industry currently receives, an amount equivalent to a 35% reduction in revenue gained through super accounts.
Many of those aged under 25 are not expected to opt in for life cover. What will probably happen is that only the more at-risk group of young members will take up life insurance and this group is more likely to make claims. Furthermore, the premium hikes could lead other fund members to opt out of life cover.